Quick facts

Adjustment bonds require the payment of interest only if the corporation has earnings to pay the interest. If the market price rises above the exercise price by an amount exceeding the premium, the difference in prices will represent the loss to the writer. For example, if an individual writes 1 XYZ July 50 call for 5 and the market price rises to 60, the stock will be called away. The writer will be required to buy the stock at 60. Since the investor received only 55 (exercise price of 50 plus premium of 5), there will be a 5-point loss. The purpose of writing calls against securities owned is to increase the overall rate of return of the portfolio Options cannot be purchased on margin. According to Regulation T, the full purchase price (the premium) must be deposited. (16-5) The Federal Reserve needs to buy secrurites and decrease the discount rate in order to make money easy A municipal broker's broker is a broker (agent) that deals only with other municipal securities brokers or dealers. The broker's broker would never deal with individual investors, establish an inventory position, or be involved in the underwriting of a new issue. (12-25) There is no requirement to receive written approval prior to giving a recommendation to a client. IUnlimited risk if you short a put Since the option is exercised in a cash account, a deposit of cash is required even though the stock is sold on the same day. The purchase of $4,000 worth of stock would require a $2,000 deposit (50% of $4,000 = $2,000). Since the call is covered, there is no margin requirement. The customer received $200 in premiums. This would be deducted from the $2,000 margin call, requiring a cash deposit of $1,800. (16-6) DATED DATE (S7) The date from which interest begins accruing on a newly issued bond. 30 day visible supply municipal secrurities refers to the face amount of new municipal bons that wwill be sold in the next 30 days through competitive and negotiated sales of egenearal obliagation and revenue bonds Municipal Securities Rulemaking Board (MSRB) rules apply to all of the parties listed except municipal bond issuers. The MSRB does not have the power to regulate municipal bond issuers. (10-9) GNMA pass-through certificates subject to federal local and state taxes Debt per capita is used when analyzing a general obligation bond and would not be considered for a revenue issue. (8-12, 8-3)

Over-the-counter traded options are adjusted for cash dividends as well as the other distributions listed. (16-10) \ \If the firm confirms the market order price but executes at a higher price the customer must still pay the price\\ Easy money interest rates are lower because there is more money available… both short and long term yields are below normal If interest rates are expected to rise over a period of time, a municipality that must raise money would probably issue securities with: Long term maturities A level debt service bond issue is one in which combined annual interest and principal payments are equal. (8-2) All traded secrurities can be traded Over the Counter Closed investment companies- pay market price plus commission Open investment companies- Net asset value plus sales charge Cash and SMA can be withdram as cash You can refund debt by reducing interest costs, changing the maturity schedule of the corporations debt as well as removing restrictinve provisions from the indenture The interest paid on special sassessment bonds is derived from the Charges on the benefited property Three month and six month tresasure bills are sold at public auctions each Monday An investment banker does not make a secondary market for new issues

A call option would be sondiedred covered if it was written again the underlying common stock held in a cash account, bank, and trust company A written letter from the firm is trequired if a customer wishes to have all trade confirmations sent to his investment advisor Money received by a coroptiatio nwhen it sells stock above its par value is called paid in capital The notice eof sale for SEC Rule 144, must be filled within 90 days Net Yield is 7.2% Treasury strips are zero coupon bonds Rights offerings – preferred stock holders do not have the right ot subscribe to rights offerings but common stockholders do… Bond attornies can opena new account without restriction The issuance of bonds does not increase stockholder equity

The owner of a call option and the writer of a put option would be entitiled to the dividend payment on the preclusion that it was excerisezed prior to the ex-dividend date

Wildcat programsa are the riskest programs while income programs are the safest The maximum passive loan is equal to the basis The electronicn communication network has two risks, limited ability to execute transactions as well as the system only excepting certain types of orders ECF exchange traded funds are allowed to be sold shirt as well as traded on margin ROTH IRA --- ualified distributions are not subject ot 10% early withdramwel fee, you may contribute up to 5000 dollars per year…contributions are NOT tax-deductible …qualified distributions are not included in an indivividuals gross income The securities exchange act of 1934 created the SEC and provided for the regulation of credit and exchanfges… the securities act of 1933 provided the regulation of new issues.. A general parter has limited liability Variable annutities must be registered with finra and the state insurance commission The first step in opening an options account is to obtain financial information from the customer to determine suitability The account must then be aprprobed for options trading by an registered options principal… a signed options agreement must be obtained within 15 days of the approval of the account The spot prices are quoted in US terms, the cost in us dollars to purchase one nits of the foreign currency Debenture bonds are backed by the full faith and credit of Divide the marketprice by the conversion ratio to get the price at parity Convertible bonds havecoupon rates that are usually lower than nonconvertible bonds.. Convertible bond holders are reditors of the corporation…it is possible that a convertible bond will ssee at a price based solely on its inherent value as a bond.. Outstanding municipal bons are most likely to be called when interest rates fall below the bond’s nominal yield A bond is usually called when the eoonomy is experiencing a slowdown and the Fed reserve board is trying to stimulate rowth by injectinv money into theeconomy….by doing this you would then bring downinterest rates to allow the economy to grow.. Warrants are perpetual and long term in their duration and allow a conversion iof the warrant into common stock A unit investment trust company is something similar to an insurance company..

. securities of a non profit organization The federal reserve board opens market comittie buys and sells treasure bills to tighten and loosen the money supply The 3-month treasury ill bond equivalent yield of a t-nill is always higher than its discount yield… If a client signs a letter of intent and contributes he is then given the right to pay the lower sales charge A corpotaiton is exempy from paing taxes on 80% of divdiencs received from common and preferred stock of another coroptation if it owns at least 20% of the distributing corporation. Exempt securities of the act of 1933 are us and goenrmetn and municiapal securities securities of small business investment companies..00 per hshare is 2. this would be classified as shor-swing profits… Acclerated depreciation allows the company to take a larger amount of the cost of an asset as a deduction in the early years and less in the later years as a result earnings are understated in the early yerasr and overstated in the later years since there will be smaller dieductions When the governemtn buys US govenremtn secutirities in the open market it increases deposits and reserves as a result it increases deposits as well as reserves The bond paying interestanually will have a lower yield to maturity as a result of a decrease in the amount of compounding that exists….50 per share. The coronation would only have to pay taxes on 20. it is 100% o the market value.Face amount certificiates and management companies are considered investment companies The corioprtate didvidien exclusion allows the corporation to exclude from taxation 70% of the dividends it receives from other cporoations The MSRB requires that the effective yield must be disclosed on a clients confirmation…the effective yield on a bond trading at a discount is the Yield to Maturity Options expire at 5:30pm eastern on the third Friday of the month The maintence requirement for shorting a stock @ 2.The more interstte payments year the high the yield and therefore a higher overall return. if the call is excerzied he will aqcquire stock as well The corporate guarantor backs a industrial development revenue bond An individual insider is not allowed to sell stocks that are held for less than six months.. An investor will buy a call and sell a put and therefore acquire stock either ay If the put is excerized AGAINST he will acquire stock of 100 shares. when shorting a stock that is between 2.50 and 5.000 of the dividends received … You take the 20% of dividends away from the 80% exclusion and you add that on to the coropation income and muiltuiply it by yhe tax bracket..

interstate authorities and intrastate authorities. regardless of the maturity or the issuers location are subject o interest rate risk The term open interst refers to call options contracts would mean the number of contracts that have no been closed out through a sale or by expiration To write a put in a cash account. treasury bills. it will isusue right all exixstin shareholders enabling htem to subscribe to stock below the current market price of the outtandingsecruities theryb saving the rocropation the costs involved in using an underwrit US Government guarantees treasury notes. bu this transaction cannot be written in a cash account. All onds. political subdivisions (such as counties or townships). A debt limitation is the statutory or constitutional maximum debt that an issuer can legally incur. .. The interest and principal are paid from the revenue received from the facility. only in a margin account.. increases properties mean an increasing tax base A diversitified bond portfolio will provide protection form a variety of risks. Revenue bonds can be issued by states. They mature prior to the useful life of the facility. governemtn national mortgage association (ginniemae) certificates…fedreeal national mortgage association bonds The dealer must do the quote at par Debt service is the tyearly amount of interest and principal payable on a bond issue Debt service consists of interest and principal due…IN order to solves subtract operatin and matintence expenses away from the total revenue and you are left with the amount aviable for debt srrcce\\\\ Comeriacaial paaper is unsecured debt and has a maxiumum matrutiy of 270 days The placement ratio is a published weeklu in the bond buyer and credit markets Municipal Assessed valuations indicate the property values that are used for tax purposes.Optiosn can not be br ough on margin and therefore requires 100% on margin A corporation intends to raise additional funds from its eixxsiting shareholder than rather than using the sevieces of anunderwriteir the coroptaiton would be engaging in a rights offering. if the writer is hsort the unlying stock the put is considered covered for margin purposes. but acannot protect against fluctuating interest rates. Municipal revenue bonds do not have debt limitations as do general obligation bonds. the customer must have cash in the account equal t othe exccersize price. (8-10) A part of the Federal Farm Credit System that provides intermediate-term loans for agricultural purposes. The cost bassi of the stock is the call premuium plus the strike price Municipal revenue bonds do not have maturity schedules that coincide with the usefulness of the facility being built.

(12-1) To qualify as an accredited investor. the call most likely will expire since thebond price will delicdne and thus cancel out th call option Options contracts cannot be used a scollateral in a margin account. (21-11) Unit investment trusts tend to not have ocoupons are be in bearer form Fiscal policy is enacted by Congress wihle Monetary polic s enacted by the federal reserve Credit balance is solvesd by adding the re T requirement plus the shro tsales proceeds Pharmeceuticals and utilities are considdred defense companies and therefore are not very effected by thebusiness cycle Bidding proceduces as well as the intent What does "8s09" mean? 8% coupon bonds due in 2009 The redemtption of a bond will not effect any dividends aid to stock holders Easing money and credit in the economy would be a result of deceaseing the discount rate as well as decreaseing the reserve requirements Narrow based indexs will hedge sector based stocks Broad based indexs will hedge diversified basd stocks When interest rates decline bond prices rise. at expieriation if hterrets rates have risen. the longer maturieis will rise more than shorter maturities due to market risk. for municipal bonds. contract size are all fixed by the exchange on hwihc the option trades at The preimumu is determined by asupply and demand o nthe flor of the exchange When a cash account is opened oi nthe name of a cporoation a new account form must be copllteetd in addition a corporate resoltuon must be filed. the bondholder must determine his adjusted cost basis. If the bond is sold before its final maturity date. expiration date.000. an individual must have $1. If the bond is bought at an original issue discount and held to maturity. foreign currency transactions: May settle on a spot or forward basis If an investor owns a 100000 face value of a t-bnd and writes a covered t-bond call. LEAPS are requity options that can have a mxuum life of 39 months The strike price.000 net worth or $200.. (9-20) The upward adjustment in the purchase price of an original issue discount bond is called accretion..A position trader is responsible for maintaining a broker-dealer's inventory as well as trading the firm's account.000 annual income with the anticipation that income will continue at that level. this identifies those officers authorixzzed to buy an sell c securities on behalf o fhte corporation and it must signed by the screcit tof the wcr=oraption . exempt from taxes. the discount is considered to be interest and. Bonds selling at a discount will rise more sharply than those selling at a premium In the Interbank Market.

if oyu have a opening selling you are establishing a short position…if you have a closing purchase you are liquidiating a short position and if you have a closing sale you are liquidiating long postion\\T The dfed fund rate are excess reserves one bnk loans ot another when the borriwing bamnk must maek a dficit reserve postion.50..the fed funds rate fluctatuates daily making it the most volatile mony market rate Reveneu issues are enerally brought to the market as negoaited issues When issued confirmation are rcieved when buying shares of a new issue Neogitated is when the issuer appoints an underwriter rather than having htem compete for oen another Foreign Currecy option are quoted in US dollars (US currency) they expire on the SAT following the third Friday of the expieration month A long stock position indicates the bullish nature of the investor. you have 60 days to compeltel the roll over or you will be charged 20% A term issue will ususlaly most likely have a sinking fund that will be used to pay interest for the account Once the trade has been purchase the reg T requires 50% of that amount not matter what price chage is within the time period Adjustment bonds need only to be paid if the corporation has sufficient income. in addition selling call options agsint this option is very conservative During the registrationg period a registered rpesntative cannot send resaevh reports to clients or accept orders and payments for nw issues form clients.since the market price si 84..If you have an opening purchase you are establishing a long postions. The rate of interstcharged is called the fed funds rate.50 liqudiation would result on a 100$ loss The coupon trate on a convertible bonds will be lower than on a similar convertible bond The market price of preferred stock is influenced by its ddividen payout ratio as well as currentl interest trate levels. Blue chip company has a long history of paying dividence A growth company nomrall has a low didvdend payout ratio The allocation of bonds will be listed in the account summary . Interest on all other debt securities mus income st be paid regardless of the coprotaion The cost bsasi will be based on the strike price minus th premum of 4.. The registered representative can send a preliminary prospectus and receive indications of interest from his clients A securities firm may harge customers a fee for the collecting dividends and or interests/appraisal of securities/ holding securities in safe keeping/ transgerfs or exchanges Whenever a lump sum withdrawl is made fomr a qualified retirement plan.

issueing ne bonds at a lower interest rate. The market value of the outstanding bonds will be determined by the supply and demand and b the general level of interest rates Hwo ever much the otion is in the money is the intrinsic value. If the stock is ellign above pariy the calue o the stock received from converting thebond would be more than the value of the bond. An arbitrage situation occurs when there is aprice difference in comparable securities. therefore it would not find municapl bonds as attractive an investment asi t would other higher yielding investment instruments A call protection provision prohibits the callin of the bonds during the early years/would be characteristic of a call protection provision Recapture probison would nto be favorable for the investor who is invested in oild and gast limited partnerships…on the other hand.. . the time value is threfor e the balance remaining of the premium The SIPC is a nonprofit organization that only broker dealers may join. a municipal registered representative must: notify the mployer and ollfow all instructions (interpretation is to get the employers permission.. An investor could The synidicate may change the provisions and allocation of the sgareemetn if it is in the best interest and the client and he lets the syndicate mebers know THE FEDERAL FUNDS RATE IS INCFLUENCED NOT SET BY THE FED RESERVE BOARD. it provides insurance for scustomer accounts in the vent of bankruptcy by a broker dealer A broker dealer is acting a principal when buying for or selling from invesntory MSRB rules require that when opening an account of an employee of anothermuniciapl firm. eliminate restrictions in the bodn resultion…. send duplicate confirmations to the employer Dividend and capital gain distributions of mutal funds can automatically be reinvested in additional shares if the shareholder chooses to do so.A 401 K plan allows an employees table income is reduced by employee contributions. but employers are obligated to match employee contributions A pension fund does not pay tax on its investments. A miunicipality would refund a bodn issue for all of the following reasons such as reducing the interst charges.AN INCREASE IN THIS RATE SUGGEST THAT THE FED HAS TAKEN MONEY OUT OF THE BANKING SYSTEM If a bond is called at par it will be held at the nonominal coupon value and therefore the ytm will be equal to that number When part of an issue of long term spelculatinve onds is called the effect of the mreimian outstandi bonds will be an improvement in their quality the issue will hve less debt outstanding and there will be less interst chargest to pay which improves th quality of the issue The debt service covereage ratio is te number of times the earnings of a revneu bond of a miucap favcltiy exceed the interst charges and principal paryments for a period of time is called the debt service coverage.

Term bonds mature at the same time with stable interst payments Advertisements must be submitte dot the exchange for approval at least10 days prior to initial use.NOT the asset value .50 per share is greater and the customer would have to deposit 2500 into the account to meet the requirement The Sales breakpoint of amutal fund is the minimum dollar amount of a purchase of a mutal fund where a volume discount is given Closed end investment companies ar ebrough and sold in the same manner as common stock.50 per share or 100% of the value of the securities whichever is ggreater. handles probelsm that about in ases of missing lost stolen or mutiliated securities…the registrat makes sure that outstanding shres do not exceed authorize shares A notice of offering is valid for 90 days An individual that sells in=dex straddles or combination is anticipating the market to be Neutral The revenue bond index is the average yield to maturity on a particular day of 25 specefic revneu bonds with 30 year maturiries A sepcialish can stop stock if it is for a public order and the specialist is guaranteeing a price When a stock has sa market value of less than 5$. specify to whom the check must be made payable. Stageflation is a combination of inflation and stagnation Subscription agreement contains the sutiatbiltiy standards for the program.. industry rules erquire a minium maitnence margin of $2. The bonds will have declining interst payments and principal amounts. the number of shares outstanding is constant. . issues and acanels stucks. IN this example 2. Securities registered in the names of customers are not part of SIPC coverage and are returned ot the appropriate individuals The transfer agent keeps a record of eah stockholders name and shares owned. specefiy who must sign the agreement.Stagnation is a period of no economic growth or economic decline. and thare usually sold at the current market price…. and make inquiries of the purchaser to make sure that he or she understandsthe remifications of the investment Priority provision are found in the certificate of limited partnership 30 days must pass before a member of a synidicate can extend credit for acustomer ona new issue Serial bonds have difernt maturity dates with less maoutns of debt outstanding as time goes by. the invest should be aware of the risks in volved and have liquidity in other investment since themoenywill be tied up for along time.Al adveritsments must be mainted on filed by the member for three years An investmentin a direct participation program usually in longterm investments which peovide tax benefits . they may be listed on the NYSE..

.An increase in the market price of an open end investment company or other security form the purchase price is appreciation. strike gain. a minor’s signature is not valid MIG ratings apply to BAN Bond anticipation notes The bonds are municipal revenue bonds which are exempt from all federal acts and regulations except antifraud provisions. cost basis. Governmetn bonds are subject to federal income tax but exempt from state income tax…munis are exempt form federal tax but subject to state tax A custodian account. the call spread the lower excere lower excersize price will have ht eigher premium An investors is always bullish if they long the option with the lower strike price This will get the correct answer every time: buy + call = opportunity to buy (bullish). protect short position buy + put = opportunity to sell (bearish).there is only a capital gain whenthe security is dodl and the appreciation is realized. sale proceeds sell + put = forced to buy (bullish). FNMA is government sponsored and is not a direct obligation of the US government BULL SPREAD involve buy thsize price and selling the higher excerisize price. protect long position ----------------------------------------------------------------------------------------------------sell + call = forced to sell (bearish). unlimited loss. cost basis Top two always pays the premium.. (8-1) Munipal revenue bonds are exempt form all federal accts and regualtiosn except antifraud provisions Securrities traded on NASDAQ would be the only choice given for which the 5% guideline would apply FDIC insurance may not apply to long –term CDs sold by broker dealers if the face amount is in exces fo 250000 Margina requirements established by the FRB can be: increased by broker dealers in the form of in-house rules. FRB rules apply to both retail and instuaitiutional and may not be repleaced by SRO rules To profit form the underwiringt the sydxcae must be able to seell the bonds to the public…the syndicate willfirst determine the yields it belvies will ebnesseacry to sell the bonds. bottom two always earns the premium Breakeven for a covered call is the stock price minus the options premium .. the tax liability on interest and dividends received is paid by the minor… margin transactions are not permitted I the account. unlimited gain. sale proceeds. .

(18-23) A client is entitled to a reduced sales charge (breakpoint) based upon the value of the accounts of other family members within the same fund family. the net asset value is lower than the asked price.75) because the net asset value is higher than the asked price. The accounts can be held at multiple broker-dealers. (12-8) The closed-end investment company is definitely Fund C (net asset value $28. A head and shoulder bottom formation indicates a bullsh reversal of a downward formation A mutual fund investor who redeems (sells) his fund shares will receive the next computed bid price on the day the shares are sold.14 . (8-4) American Telephone Company of Ohio is a corporation. (18-8) Industry rules allow a maximum total compensation of 10% of the gross proceeds of the offering in a limited partnership.A head shoulder formation indicates th reversal of anupward trend. (20-3) ERISA provides private sector employers with guidelines for proper investments in employee pension plans. credit. (17-9) . minors accounts and certain retirement accounts. (18-23) The Pink Sheets list market makers and their bid and asked quotations for over-the-counter stocks which are not listed on Nasdaq. These securities are also known as non-Nasdaq stocks. interest paid on its debt obligations is subject to federal and state income tax. This is typical of an open-end investment company or mutual fund. (22-1) The bond counsel is not concerned with MSRB regulations on dealer disclosures Most money market funds will declare dividends daily and pay. In all of the other choices. (18-2) <atching orders is a form of manipulation and is prohibited. This can only occur in a closed-end investment company. This provides protection for employees against improper investments by their employer. ERISA does not apply to public sector (government) plans. Therefore. The CPI measures the change from a previous base period and is computed monthly. Due diliegence meeting. or reinvest the dividends on a monthly basis. (11-17) The price need not be on the order ticket The Consumer Price Index measures the average change in prices for selected goods and services purchased by consumers in certain cities. or debt issued between two counties. A sell ticket must indicate if it is a short sale or a sale of securities owned by the client. A no-load openend investment company has the bid price or net asset value and the asked price equal. The location of the securities must be indicated (long in the customer's account or held by the customer). (6-15) All order tickets must contain the customer's account number and whether the registered representative solicited the order or it was unsolicited. stablitization and blue sky laws are all in the underwriting of a new issue Examples of overlapping debt would be for an adjoining road district or school district. Examples would include joint accounts. This information is usually found in the prospectus of the money market fund.asked price $27.

interest is deducted before taxes while dividends are taken from net income. The stock has been temporarily borrowed and does not belong to the customer and cannot be tendered.m.A collateralized Ttime draft is a bankers acceptane Federal regulation requires that an individual receive payment for the redemption of a mutual fund within seven days.. The sentry funds net asset value is listed being $13.the ex dividend date of a mutal fund is primarily the same day as the record date Foreign exhange rates are estblishin th interbank marget the interbmarket invoves the purchase and sales of feigen curriecnies between commeircial banks…the phili stock exchange is where foreign currency options transactions take place. Eastern Time.000) whether it was interest on the subordinated debentures or dividends on the preferred stock. It is a violation of federal law for anyone to tender the stock that a customer borrowed in a short margin account. (9-7) Duration MEASURES PRICE SNESITITIVITY FOR FIXED IN COME SECURITIES GIVEN CHANGES IN INTEREST RATES The maximum civil fine is 3 times the profit gained or loss avoided . (22-23) Lower grade bonds have higher yields and lower market prices Higher grade bonds have lower yields and higher market prices Mutual funds sell ex-divdiend whenver the fund or its pricincipal udnerwirter determines. However.42 If the fed funds rate is steadily rising it indicxates the federal reserve is tightening credit Banks amy Sell long is you own more shares than you intend on selling Interset earned on which of the following would be added ot inocome when calculating the alternative minimum tax ANSWER –private activity bonds If you short stocks the margin requirement is 2000 miumhum. if you purhase it is 2000 or 100% of the purchase price whichever is less A specialist may not accept market ordes and not held orders…it would accept open orders and day orders The company would pay the same amount ($500.. (16-2) REITS allow the flow xthrough of income not losses Whenever an investor sells shares in a mutual fund he will receive the bid price or net asset value. (18-23) According to tax law a general partner must have at least 1% participation in profits and losses for a business to maintain lmited partnership status Listed equity options expire on the Saturday following the third Friday of the month at 11:59 p.

What is important is the amount of commissions the client paid. the clients investment objectives Mortgage amortization may not be deducted form real estate prgoragras.. revenue bonds usually pay higher rates of interst and therefore much more risky than general oblisgation bonds…revenue bonds are also exempt from federal taxes as well as GO bonds A tax swap would be the sale and purchase of bonds (or other securities) to realize a capital loss that can be offset against a capital gain. availibitiy of the securities and expenses incurred doing the trade IF ther are two bonds. (21-17) The type of securities is the least important factor when it comes analyze whether or not the RR churned a clients account. (12-4) If the federal tax exemption for munuiciapl bond interest were eliminated on woul expect yields on newly issued municipal bonds to increase Commercial. the transaction is called a proceeds transaction. GNMA.Tombstone ad states tha the bonds are first morgrage bonds which means they are secured by a lienon prorerty owned by the southern California gas company…they are publicatly traded they for not secured by property owned by the sate of California CMOs can be backed by securities issued by FNMA. revenue bons can be issued even though local debt limits have been erached. CMOS do not have tax free interest…interest payments from a CMO re fully taxable. while there will be no cap loss allowed for bond B since it was bought a ta premium When the wash sale rule is activated the investor must add the loss to the new cost of the stock regardless of whert her stock is repurchased a price that is higher or lower than the orginal cost .. paper is not backed by a pledge of corporations specific assets Revenue bonds can be issued without voter approval. and FHLMC. the amount of portfolio turnover.. In determining the markup the broker-dealer will charge. industry rules state that the firm should consider only the amount of money involved in the sale to the customer. CMO’’s have various bonds classs tax free interest AAA ratings 1000 denominations When the proceeds of the sale of one stock are used to purchase another stock from the same broker-dealer. one is bought at a doucnt the other is bought at a premium the discout will be taxed as ordinary income . whiel depreciation maitnence and property tax are The premium of a new issue of bonds is adde othe total interst cost to the issuer On the day prior toe he exdiddend date for an ordinary cash dividend a holder of a call tenders an excerize notice…the investor will eb entitled ot the dividend if the optio is excersized prior to eh ex-divdend date Municpal bonds are exempt fom the 5% markeup policy…it will take into account dollar amount involved in the transaction.

(10-3) Reclamation is the process of returning securities that were previously accepted on the settlement date.Currency values are established by a supply and demand of the currency…supply and demand for a currency may be influenced by the countrys rate of inflation level of interestrates gold reserves and trade defecit A buy stop order limits the losses if the stock advances on a customer who shorts 1000 shares An investor is a limited partner in a d irect participation program that the irs has determined to be abusive the investor may be subject to pay back taxes as well as penalities and interest If an individual wishes to utilze a municipal bond swap he may be executed to establish a loss for tax xpurposees . the par amount. (16-3) The bond counsel writes the legal opinion. The confirmation must include whether the customer purchased or sold. and therefore an increase in the discount rate increases the interests rates and decreases the price and dollar value of the bond Moral obligation bonds are municipal revenue bonds which are payable by the state if revenues from the project do not satisfy debt service payments. Double-barreled bonds are issued as general obligations backed by the full faith and credit of the issuing municipality. in three business days. state. However. (12-29) Short calls and long puts are the same side of the market When a customer gives a registered representative the follow instructions… buy 000 share of general electric “whevern you thin kthe price is . Any pertinent call feature must be shown as well as the principal amount. in order for the state to service the debt. Exercise settlement is in the underlying stock. (8-11) The indenture contns all the agreements and covenants pertaining to a bond issue. The broker-dealer must disclose if it acted as principal or . and total amount of the transaction. accrued interest. improve yieldse cash flow. (6-1) A municipality's debt limit is the maximum amount of debt a municipality can incur. (8-2) The discount rate moves proportionately with the interest rate. approval of the state legislature is required. and local legislation to be sure that the issue meets all requirements. imporove mat A closed-end provision in a bond indenture means that additional borrowing against a particular source of revenue is prohibited. It states that the interest is exempt from federal taxation and that the issue is valid and legal. including coupon and maturity date. and a complete description of the securities. the bond counsel would examine all federal. the order can be executed bby the RR only on the same tradin day MSRB rules require that a confirmation be sent to a customer at or before the completion of the transaction (settlement date). increasieis. Prior to giving an opinion as to the validity and tax exemption of the issue. and would contain the provisiosn for the application and allocation of funds of a revenue bond When a specialist stops an order she is guaranteeing a price Long-term anticipation securities (LEAPs) may be exercised on any day prior to expiration (American style). An open-end provision means additional borrowing against a revenue source is permitted. Rejection is when the brokerage firm refuses delivery of the securities on the settlement date.

Fed funds are not secondary markets The curnt ratio is a comparison of current assests to current liabilities and is used to determine a companys ability to pay those debts that would be maturing in one year Official statement must contain. A time to sell the bonds has been set. their profits are derived form the difference between the payments made on outstanding mortgages and the amount received in rental income.they do not relate to theissuer and ned not be included on the bidform An options premium is deterined by the volatitility o the underlying stock. What does this mean? I. and twelve months. the amount of any fee received by the broker dealer as agent for the issuer.it will specefity suitability standards a well as the amotn the individual will contribute When pricing a bond only a call feature that allows the issuer to call the entire issue is used Treasuury bills are issued one month. have higher markets prices and lower yields…Lowere rated bods have lower market prices and higher yields Real interst rate is yield-inflation rate Subscription agreement needed in order to purchase an interst in a direct paticiplation program. the amount of the commission must be disclosed. The price of the bonds has been set. This market is done where institutions trade with other institutions. Ratings and denominations are not included on the confirmation. it would be considred a trade executed in the fourth market. the current market price of the underlying stock and the period of time remaining until the option expieres . A recall time has been established. REITS allow the flow xthrough of income not losses Individuals that pursue market timein g strategy are frre uent users of ETFs Reoffering yieldsd relate to eh sale of bondsby the iwinning syndicate.. III.. not 9 REITS must distribute 90% of their earnings to shareholders. three months. (12-30) Dealer A gives bonds firm to Dealer B with a recall. the amoutb of underwriting spread.. The initial reoffering price for each maturity in the issueyou A registered options principal must approve a customer who has an existing account at a broker dealer and now ishes to trade options (ROP) A municipal securities principal must review and approve municipal transactions made with individual. When a mutual fund buys stock from the portfolio of an insurance company. II. Dealer B has the right to sell the bonds before anyone else. IV. six months.agent. Trust departments commercial bank portfolios causauality insurance companies Higher rated bonds. and if acting as an agent.

000. a random selection basis or any method that is fair and equitable.000 shares). Exempt secrurites include: securities issued by a state chartered banks. SIPC does not insure creditors of the broker-dealer or the failed firm's own inventory account. The tax related aspects are only of benefit if the program is economically sound.. In addition. as the number of shares increase Defnse stocks such as brewery tobacoo insurance companies are not directly influenced by changes in the conomy.20 dividend divided by the $2.000 divided by 5. of which $100. (20-18) The principal must approve all adveristing prior to use The dividend payout ratio is the percentage of earnings per share that is being paid out in the form of dividends.00 ($10. Members firms can select customers with open short postions on a first-in-first out basis.000. municipal bonds. .000 may be cash.0000 dividends divided by 5. (12-20) State governemtns receive the most amotun of revenue form sales taxes gasoline taxes excise taxaes and license fees. Each account is covered for up to $500. the markup charged on a principal transaction does not need to be disclosed. The $0.000. (12-30) The account approval requirements for penny stocks under SEC Rule 15g-9 do not apply to existing customers who have maintained an account with a broker-dealer for more than one year or have previously engaged in three or more transactions involving penny stocks..20 dividend per share ($1. a decrease in par value will occur. (22-29) All of the choices given regarding customer confirmations are true under MSRB rules except that they need not disclose if the dealer is acting as a principal or agent in the transaction. the dealer is required to disclose the commission on agency transactions and the third party if there is a third party to the transaction. federal governemtn securities.the net result would be a reduction in the aount of interst being paid by the issuer. (3-8) The most important factor for any DPP is whether it is a good investment. securities issued by small business investment companies The dividend payout ratio is not a factor when it comes to listing on an exchange WWhen a memberfirm issues a research report it must be approved by a supervisory analyst… A supervisory analyst must be registere as such with FINRA and is required to pass a separate exminiation… If a company declares a forward to split. This is not true since the broker-dealer must disclose the capacity in which it acted.000 shares).00 EPS equals a 10% dividend payout ratio.. ABC pays a $0.000.wherre as luxury items like leisure heavy equipment and autobiles are SIPC provides protection for customer accounts in the event of a broker-dealer's failure.The optiosn clearing coropation selects a member firm on a random slection basis only. However. The EPS is $2. Local municipalities raise most of their funds form property taxes Refudnign would occur when intesst rates are lower than when the issue was originally sold..000. Any recommendation to a customer should take into account the customer's investment objectives.

and Tenants in Common are two types of joint accounts. A NON NASDAQ stock would not appear on the listing When opening an options account for a customer Sutitability Risk disclosure ROP approval Begin trading Sign options agreement account within 15 days of account approval Mutual funds settle same day.nd the traiding in the OTC market. Uniform Transfers to Minors Act (UTMA) accounts are established by a custodian for the benefit of a single minor child. Transfer on Death (TOD) is an individual account used to avoid probate if the account owner dies. (9-20) Credit rating will NOT always be lower than GO bond The minuicipality agree t okeep rates high enough to cover debt service obligations FNMA is governemntsponsored and not backed by the faith and credit of the government An investor purchasing a secondary market discount municipal bond will have ordinary income if the bond is held to maturity. The sale can be made at whatever price is agreed upon between the buyer and seller. (2-7) . which is reported as ordinary income. while convertible bonds settle T+3 Ok Pre-sale orders receive the highest priority and a period of time must be allowed for the accumulation of orders..000). The interest on the bonds is paid from the lease rental payments made by the corporation.The CQS consolidated quotation system would display qutations on cmmon stock preferred stock warrants rights which are registered on the american stock exchange or the new york stock exchange…. Since the bond was purchased at 90 ($900) and held to maturity when the investor receives par ($1. (10-9)  Current financial information must be made available to prospective purchasers  The sale must conform to the provisions of SEC Rule 144  A brokerage firm can act as an agent or principal in the transaction All of the statements regarding restricted securities are true except the sale must be at the bid price as determined by the current quote of the outstanding securities. the investor will have a $100 gain. (21-11) The accretionf oa discount bond OID is based on a constant yield method which uses the bond’s yield to maturity Industrial development revenue bonds are issued by local municipal governments to build factories or other commercial properties. Member orders do not receive priority over designated orders and syndicate procedures do not have to be disclosed to potential purchasers. (8-10) Joint Tenants with Right of Survivorship (JTWROS). The plant or property is leased by the municipality to a corporation. The credit rating of the bond is based upon the credit rating of the corporation and not by an analysis of the credit rating of the municipal government issuing the bonds.

The common stock account and the paid-in capital account. The premium in this example is six points which must be amortized over its eight-year life.When a bond is pre-refunded. the only applicable date is the first call feature. (21-12) The underwriting is being done best-efforts. The long-term debt ratio will fall as the equity capital rises and since the company is raising cash. Topic and sponsor othe seminar.. 22-30) A 5 % markup trade applies to proceeds transactions The ex dividend date is standardized in the securite industry The selling of shares within a reit is imiliar to that shares sold on the NYSE A bear spread always involves buying the higher excerisize price and a bull speread always involves buying the lower excersize price Uniforma transfers to minors do not require supplemental documaentation Money market funds are noload funds. so liquidity will increase. fixed assets will be unchanged. the premium must be amortized (reduced) over its life. the cashiers department is concerned with the handleing and protection of securities… Interest + divididends – expenses = net investment income Bond most likely to be refunding is to save interest costs. Finally. dividends are computed daily and credited monthly Beta measures performance as it relates to the over all market Alpha measure a stocks return When a bond is purchased at a premium (above par value). will also increase. (22-26.4 1/2 points amortized premium). current assets will increase. Its cost basis would therefore be 101 1/2 (106 original cost .the names and addresses are not needed . (9-2) Unrealized capital gains on stocks are not included in taxable income. After six years. and can be doen by refuding an issue at a higher interest rate When giving a seminar a registered representative must make a record of the date. (5-18) The company will receive cash from the sale of the stock. Therefore. tender offers or converting rights into stock The P&S department normall handles function of computeting and comparing trades Margin department handles the enforcement of regulation T. since no guarantee to raise the $10 million has been made by Winco Securities. the bond must be priced to the first call date. Winco will be compensated only for the shares it sells and assumes no liability in the deal. It must be amortized 3/4 point each year (6 points divided by 8 years to maturity). The reorganization department handles the exchange of one security for another. which are part of stockholders' equity. Winco is acting as an agent in the transaction because any unsold shares will be retained by Fred's Auto Centers. it would be reduced by 4 1/2 points (3/4 x 6).

th employee needs wirten permidssion form his employer prior to opening the account as well as duplicate confirmations sent to his employer…. only that the partnership does not pay income tax. The bond is currently selling in the market at 85 ($850) and the common stock is selling at 21.. 5-9. All options stop trading on the third Friday of the month Equity options expire on the SAT following the third Friday of the month Europena style stock index option may be excersize on ly on the day prior to expieration so index options expire on SAT then the option must expxire on Friday Sectors stock portfolio will be hedged by narrow based index puts If an idndivdudal wishes to open an account to trade options . (22-28) Buy stop orders and sell stop orders can do all of the following Provide price protection for a short positions and long position Cause a pronounced fluctuation in market price of a stock when the order is activated/// IT can not give a broker discretion when order is activated… If an employee of a member firms oopens an option account another members firm. (22-10) XYZ Corporation has a 6 1/2% convertible bond outstanding which is convertible into 40 shares of common stock.they are NOT appropriate for oil and gas pipes MOrtgagebacked securities are subject to prepayment risk If an individual dies in a join tenenats with rights of survivorship. 5-10) A stock is overbought at its resistance level and oversold at its support level 22-39 Selling short can only take place in a margin account The Bond Buyer is new issue oriented and would not have secondary market offerings. then the broker dealer of the account must receive a death certificate as proof of death befor ei may mark an account deceased or change the account title in a joint account. (12-26) The earnings multiple is called the price-earnings ratio. it will receive the highest call price sellini in the shortest number of years 5-17. The XYZ Corporation is offering its existing bondholders a new straight .A limited partnership has no resetrictions as to the amount of partners that there are. th account msut be approbed: prior to the time an initial order is accepted IF thebond is selling at a discount. It is NOT necc for the empyler to get permission for each time a trade is executed The Federal Reserve Board appoints primary dealers in government securities. aircraft oild and railroad locomotives…. and the owenership passes its profits and losses throughout its participants Equipment leasing programs are approtiate for computer systems.

It is a measure of business activity in the marketplace. II.000. Reduce interest costs Reduce potential dilution Have no effect on interest costs Increase dilution I and II I and IV II and III III and IV Explanation: Correct. outstanding shares would increase causing earnings per share to decrease (dilute).000 or more that has been sold in a particular week. State legislative approval is required before a municipality can begin making payments on a moral obligation bond.. IV. The Official Statement is prepared after the issue is sold and contains a description of the issue and financial information of the issuer. the sales subject to the registration and prospectus requirements of the securites act 1933 I this also includes transactiosn done through mergers. Prior to the refunding. The effect of the successful completion of the proposal would be to: I. The effect of the successful completion of the proposal (refunding) would be to reduce potential dilution because the conversion provision is being eliminated. consolidations spinoffs incvolving exchanges of stock are all covered under the rule. (12-26) The bond with most interest risk or price volatility is the one with lowest coupon longest maturity . III. d. b. The Bond Buyer New Issue Worksheets are a service of the Bond Buyer and show details of the issue and bidding requirements. a copy of the official statement if published IT IS NOT NECC FOR A COPY OF UDNERWTING AGREEMENT AS WELL AS THE NAMES OF THE SYNDICATE MEMBERSR A UNIT INVESTMETN TRUST DOES NOT CHARGE A MANGEMENT FEE A MINOR MAY NOT ENDORSE A STOCK CERTIFICATE Investment Advisors are normally compensated by receiving a fee based upon a percentage of the asstes under management The placement ratio represents the percentage of new municipal bond issues of $5. (8-11) Zero coupon bonds eliminate reinvestment risk If a company wishes to create a division and ceate adidtioanl sales in order for a reclassification to occur.(nonconvertible) bond paying 6 1/2% which matures at the same time as the convertible bond. There would be no reduction in interest costs since the new bonds are paying the same rate of interest as the old bonds (6 1/2%). The Bond Buyer compiles this ratio. a. (12-26) ON a new municipal issue a dealer must provide the customer with a final confirmation with the toal money amount. if all of the bonds were converted into common stock. c. (6-8) The velocity of money represents the number of times that a dollar is spent over a given period.

If the bond is sold below the adjusted cost basis. This bond is purchased at $105. the bond is sold at 95. the adjusted cost basis is $103. liquor. there is a capital loss of $8. Also called an Adjustment Bond. there is neither a loss nor a gain for tax purposes. the company has iincome. The premium of $5.000 with a 5-year maturity. b.000 divided by 5 years equals $1. c.000). (21-12) INCOME BOND (S7) A corporate debt issue that pays interest only when.000). After two years. and gives the brokerage firm the right to pledge customer securities to a bank as collateral for a loan In order to caluculate the SMA you take the market value sof the long account subtract the debit balance.take the market value of the short account subtract the credit balance…take 50% of both add together and you have your SMA A special tax bond is financed by a tax on certain items such as cigarettes. Debenture bond. If the bond is sold above the adjusted cost basis. each year the original cost of the bond is reduced by $1. Since the bond is sold at $95.. the result is a capital loss.corporate bond backed by the general credit of a company and not secured by a mortgage or lien on any specific property. If the bond is sold after 2 years. and if.000) must be amortized over a 5-year period ($5.000 ($105. This is because the adjusted basis would equal the par value after the premium is amortized.000 = $103. the bond's premium must be amortized to find an adjusted cost basis. d.$2.000 ($105. the investor has a(n): a.000 loss $4.000 . When a municipal bond is purchased at a premium.000.000 loss Explanation: Incorrect.000 ($103.000 $100. $2.000 = $5.000 loss $10. For tax purposes.000 per year). or gasoline. Therefore.000.000 $95. Purchasing several AA or better rated bonds with various matrity dates would be more advantageous than purchasing just one municipal bond Treasury bills do not trade with accrued interest they are issued at a discount and mature at a par (7-3) . If the bond is held to maturity.A hypothecation agreement is needed to open a margin account. the result is a capital gain. (810) The priority provisions Presale group net designate dand member orders are all written in the underwriters agreement Abond purchased at a premium and callable at par will always have a lower yield to call than to maturity 8-24 An investor purchases a $100m face value municipal bond with a 5-year maturity at 105.000 loss $8.

since ther are no speicefic recommendations. if a public customer takes a member firm to arbitration to resolve a dispute.Bank qualified municipal bonds allow banks to deduct 80% of the intest paid to depositers on the funds used to purchase bonds. (12-27) When there is an acquisition or merger taking place. (6-9) Options sales literature must be accompanied by or preceded by a risk disclosure document. This can be accompllishe dby furnishing documents such as past tax returns and a statement of net worth A call option may be wirten in a cash account if it is covered. (19-8) In order to protect a short position profit should the market price increase. (9-21) Private placements under reg D. The trader or risk arbitrageur will go long the company being acquired and sell short the shares of the acquiring company. name of the security. etc. if included. (16-12) When investing in a DPP the customer must verify that e metts all suitability standards. the investor will have no gain or loss. the majority of the panel must come from outside of the securities industry unless the . and whether it is a buy or sell. There is no requirement to include a schedule of transaction costs. number of shares or par value (for a bond). Regal Corporation's stock will increase and Dynasty Corporation's stock will decline. you must enter a buy stop order so that it may be activated as a market order when the price is right All advertising sale literature and education material must be approved by a ROP prior to being sent to a customer. traders will try to take advantage of the activity between the common stocks of the two companies. If the acquisition is successful. Both restricted and control stock are subject to the volume limitations under the Rule. This process is known as risk arbitrage.). An annualized rate of return may be included under certain circumstances. the proceeds in excess of cost are taxable to the beneficiary as ordinary income. The option is covered if the underlying secriryity is long in the account Rule 144 requires that restricted (unregistered) stock be held for six months before it can be resold. the OCC disclosure document does nto need to precede or acconmpany the letter Under the Code of Arbitration. When a variable annuity contract holder dies during the accumulation period. Trading performance. A customers social security number is not nEcc on a ticket order If a zero-coupon security is sold for its accreted value. must cover a one-year period. a municipality may only issue up to 10million annually The Bond Buyer computes the Revenue Bond Index which is the average yield of 25 revenue bonds with 30-year maturities. limitations (limit. govt securities municipal securitesare all EXEMPT from fed regulation… but they still msut oblige to the antifraud probisions PUBLIC offerings of coprate securities and limited partnerships intest are subject to federal registration An order ticket must include the customer's account number. stop. Control stock (registered stock purchased by insiders) is not subject to a holding period requirement under Rule 144. intrastate offerings conducted under Rule 147 and treasury bills sold thorugh the federal reservebanks.

However. he would have to deposit: a. Income is received from the rental income paid by the tenant leasing the real estate owned by the REIT. Blue may use the $1. (719)crease. Blue's margin account has a market value of $20. all such communications must offer educational material describing CMOs. the market price of outstanding bonds will decrease.. (18-30) Mr. the president of a company) must hold unregistered (restricted) stock for at least six months before it may be sold.000. The dividends paid to shareholders of REITs do not qualify for the lower 15% tax rate given other types of common and preferred stock. Since total assets (TA) and total liabilities (TL) remain the same. Since the purchase price of the options is $2.000. Working capital (current assets minus current liabilities) is reduced since current assets are reduced. (13-20. stockholders' equity (TA . an affiliated person (e.000 x 50%) from the current equity in the account ($11. Since the President of XYZ Corporation only owned the stock for 90 days. Overall.TL) does not change. shopping centers.000 of options. This will remain the same over the life of his investment. current assets (cash) are reduced and fixed assets (machinery) are increased by the same amount. Also. when yields in the market in Communications concerning CMOs may not make comparisons between CMOs and other products.000 $2. the order to sell would violate Rule 144 if executed. (9-20) The approval of an account to trade penny stocks is not required if the account has been in existence for more than one year or if all transactions in penny stocks are non-recommended.000). hospitals and nursing homes. hotels. (1-14) A majority of the arbitration panal must ocme from outside the securities industry. They can be suitable for both retail and institutional investors. $10. (22-29) According to Rule 144.000 SMA and would be required to deposit an additional $1.000 and a debit balance of $9.000. The margin requirement when purchasing options is 100% of the purchase price (premium). d.000 $3. The SMA is found by subtracting the required equity. 0 $1. (5-7) REITs invest in many different types of residential and commercial income-producing real estate such as apartment buildings. 16-5) The number of clients annuity untis never change When purchasing machinery with cash. Blue purchases $2. If Mr. b. Neither the broker-dealer nor the customer may actually pick the arbitrators and arbitrators do not have to be attorneys. storage facilities.20%.g. REITs must pay out a minimum of 90% of its taxable income and the dividends received by investors are taxed as ordinary income.customer requests a panel with a majority of industry arbitrators. The coupon rate was established when the bonds were issued and will never change. uness the customer requests panal with a majority of industry arbitrators When the investor bought the bond. Mr. c. office complexes. he established a yield-to-maturity of 7. total assets do not change.000 Explanation: Incorrect.000 ($20. (12-21) .

In order to sell short. II. however. For inactive accounts. Distributions from profits on the option positions are capital gains. Investor's ability to commit a large amount of money for a long period of time in a relatively non-liquid investment Investor's current and future need for tax benefits Investor's ability to meet financial needs should the amount invested be lost Investor's ability to meet applicable state requirements for these type of investments . and dated date are required. (2117. statements must be sent at least quarterly. (10-7) Interest (and principal) payments on GNMA pass-through certificates are made monthly Debentures may be issued with warrants attached. it may be difficult or impossible to borrow the security. (3-3) Only individuals are permitted to have joint accounts. A put option may be an attractive alternative to selling short. the broker-dealer is required to borrow the security. 7-12) The distrubtion form th GNMA secruties ar generally derived form interst and are therefore taxed as ordinary income…distribution from profits on the options oppositions are capital gains Which of the following would be an important factor when considering an investor's suitability for a direct participation program? (20-18) ALL OF THEM I. The underwriting syndicate makes a commitnemetn to the issuer to purchase the entire offering. if an issue is thinly traded. 13-14. III. the transactions for the underlying security will occur at that set price. par value. Although short sales may only be executed in a margin account. The account may be established as tenants in common or tenants with right of survivorship. maturity schedule. the syndicate cannon resell the offering at the public offering price The distributions from the GNMA securities are generally derived from interest and are therefore taxed as ordinary income. IV. amount of any discount or premium. the broker-dealer must calculate the total interest cost to the issuer. An account for an investment club would not be a joint account.When computing a competitive bid. put options are unlikely to be available on a thinly traded security. 4-11. A custodian account may be established for the benefit of only one minor. 12-15. the coupon (interest rate). (14-1. (2-7) Both options and warrants have a strike price --if exercised. To calculate total interest cost. It is in the case of convertible bonds or convertible preferred stock that investors can convert the security into the underlying stock with no additional payment of money. 6-6) A client may sell short or buy a put to profit from a decline in the value of a security is anticipated. 4-15. (4-11) Debentures may be issued with warrants attached this allows the coraoption to pay a lower interst rate on the debtnrues When a bond is called the bondholder receives the call price plus accrured interst Brokerage firms send customer statements monthly for accounts with activity during that month. This allows the corporation to pay a lower interest rate on the debentures. (11-4. 14-15) Sales charges are not considered expenses of the fund.

and hypothecation agreement. then all other bonds would fluctuate sharply in price to bring yields in line with interest rates. Under the hypothecation agreement. (6-8) Issuer-directed securities provide an exemption for certain individuals under the New Issue Rule. However. (8-11) In a disproportionate sharing arrangement. Registered representatives are also allowed to purchase shares of an equity IPO if the issuer is that person's employing broker-dealer or is the parent or subsidary of the broker-dealer. .600. the subsidary of an issuer. (20-17) A Keogh plan must be opened by the end of the tax year (December 31st). 13-6) The legislature does not have a legal obligation to provide funds but is considered to have a moral obligation. The fact that interest rates are stable is another reason why convertible bonds is the best answer. the best answer would be that convertible bonds would fluctuate the most. contributions are permitted until the filing deadline for the tax return (April 15th). Under this provision issuers may direct securities to the parent company of an issuer. The credit agreement establishes the customer's responsibility to pay interest on the debit balance. and employees and directors of an issuer. I Securities in a margin account would always be held at the brokerage firm in street name to allow the firm to liquidate shares if necessary. If the question had stated that interest rates were moving sharply upward or downward.600. Funds would become available after legislative approval. 20% of $120. The firm would then await the proper legal documents needed to release the assets. the firm would freeze the assets of the account because the death of a partner terminates the partnership.000 is $24. the customer pledges securities as collateral for the loan. industry rules require that the customer must deposit at least $2.000. Smith died. Since the initial trade was for $3. whichever is less. (13-2. (1710) Beta measures systematic risk or credit risk If Mr. the sponsor (general partner) shares in the costs of the program and receives a portion of the profits. The price would fluctuate with the price movements of the common stock. (3-3) The convertible bonds would fluctuate the most because they are convertible into common stock.000 and would be the maximum allowable deductible contribution. the question asks what would happen in a period of stable interest rates. loan consent agreement. It is disproportionate because the percentage share of profits is much larger than the percentage share of costs. to a Keogh. The loan consent agreement permits the firm to lend the securities to other customers or other broker-dealers. Given that statement. A self-employed individual may deduct 20% of self-employed income or $49. provided they are employees or directors of the issuer. The issuer-directed provision also permits immediate family members to participate in the offering.The term payment for order flow refers to the payment to a broker dealer by a market make in return for routing order to that market maker When aggregating an ddeterming the position limit a member firm will long calls and short puts as well as short calls and long puts signs the basic customer agreement which consists of a credit agreement.000 and may borrow up to $1. However.

(11-3) . all such communications must offer educational material describing CMOs. the parity for the stock is $60 per share ($1.000 sale of corporate bonds sold interstate and a sale by a brokerage firm throughout the country (also interstate) of $25. A $20. d. IV.200 bond price divided by 20 shares). (6-1) A bond is convertible into stock at $50 per share. Seena's executor would then provide documentation to establish authority to act on behalf of the estate. (9-7) The Trust Indenture Act of 1939 regulates the public issuance of corporate securities that are sold interstate.000 of corporate debentures would be covered under the Trust Indenture Act of 1939. a. c. An investor would profit from this situation by purchasing bonds at 120 and shorting the stock at 65. (7-19) Tax value is computed by multiplying the assessed value by the mil Upon learning of Seena's death. Each bond may be converted into 20 shares of stock at a cost of $60 per share. government securities or private placements. It does not cover U. To profit from this arbitrage opportunity. The market price of the bond is 120. (6-6) Communications concerning CMOs may not make comparisons between CMOs and other products.000. These shares may then be used to cover the short sale. if necessary.000 par divided by 50) and the bond is priced at 120.000. Buy 5 bonds Buy 100 shares of stock Sell 5 bonds short Sell 100 shares of stock short I and III I and IV II and III II and IV Explanation: Correct.60 cost). The market price of the stock is 65. the brokerage firm would freeze the account. An arbitrage situation exists because the stock is selling at a 5-point premium to parity (65 market price . A purchase could be made on behalf of the fund. Typically. buy it in) within 10 business days after settlement. III. 2-7) Immediate or cancel A discount bond will always be priced to maturity SEC rules require that the broker-dealer must receive the stock (or. establishing a 5-point profit (65 short sale price . b. Also. an investor should: I. (3-3.An attorney hired to assist in the IPO has a restricted status because he is not employed by the broker-dealer. II. A portfolio manager of a fund may not purchase for his personal account. Seena's estate would become the third joint owner in the existing Tenants in Common arrangement.S. Since the bond is convertible into 20 shares of stock ($1.60 parity price).

9-12)\\ Both the strike price and premium for a tbond option are expressed as a percentage fo the face value of the underlying bond . It requires that a trustee be appointed to act in the bondholders' interest.. A mutilatedcoupon may be guaranteed by any commercial bank as well as the issuer or its agent Auction rate securities are usually sold as an alternative to other short-term securities….the registered representative also is required to disclose any material relating ot speceic features of the autiction.these are controlled by the boardd A mutilted certificate may be authenticated by the issuer or an agentn of the isser (transfer agent or paying agent). (6-1) A call premiumis best described as the amount the idsuerpays above 100 to retire bonds prior to maturity Indexx options move in the same direction as the market as a whoel and therefore provide a better hedge than individual stock options When purchasing a straddle the investors maximum profit is unlimited since it has a call and a put When selling stock to a customer a markup should be based upon the lowest offer on the NASDAQ system not the price th dealer paid to purchase the stock The issuer appoints the bond counsel The registere representative and office manager msut always ign the ne account form… The customers signature would be reuired for a margin account but NOT a cash account If a dealer acts on an agency basis.the investment may not be suitable for liquidity An order book official is only able to accept Limit orders The Trust Indenture Act relates to the issuance of corporate debt instruments. (18-30. whiel the SEXC and FINRA enforce and inspect the rules REITs are regulated as securities under the Securities Act of 1933. the customers order mus be exectured at a price that is fair and reasonable When an investor sells an interest in a limited partner ship his or her cost bassi fo tax purposes is the adjusted basis Price does not diversify corporate bond portfolios THE MSRB formulate and interprets rules.. if authenticated it is considered a good delivery.Bankers acceptance: helps to finance foreign trade between importers and exporters The minimum request for dealer placed commercial paper is normally 100000 ShareHOLDERS vote on stock splits and irectro elections they do not vote on cash dividends nor sotck dividends. An investor purchasing a REIT in the primary market must receive a prospectus.

. By purchasing put options. Reoffering yields are based on the price paid by purchasers and are not a part of the underwriters bid. (17-12) . Reoffering Yields Bond years NIC TIC Explanation: Correct. c. SEPs are funded by employer contributions only. which do allow for employees to make nondeductible contributions to their own account. When the bond years of each maturity are multiplied by the respective coupon rate and then totaled. NIC and TIC are used to determine the cost of the bid to the issuer. the investor would have the right to sell his stock at a set price (strike price) and would establish a specific sales price. It is not activated until the market declines to or below the stop price.A coincident ) enonomic indicator is the industrial production index. b. (12-31) When pricing a bond (dtermingi the yield when price is known or determing theprice when yield is known . 11-23) For an OID the scount is considred interst. because this is a muni bond thi intest is tax empt.000 par value bonds by the years to maturity. the discount is reported as ordinary income A simplified employee pension plan (SEP IRA) does not allow the employee to make contributions.for a non-OID. (15-4. This is different than for Keogh Plans. d. Bond years are calculated by multiplying the number of $1. the yield to the call must be shown because the maturity is no longer of importance. Taxable equivalent yield and after tax yield are never shown since the investor's tax bracket and/or capital gains rate cannot be accurately predicted. the coupon dettlement date and matrity are required and NOT bond years A sell stop order can be used to protect a profit or limit a loss on an existing long position. A trader is responsible for postioning (carryin inventory) secondary market municiap bonds (control positions) Options and CMO adversiting must filed 10 days prior to use Mutual funds and unit investment trust must be filed 10 days following initial use Insiders are not permitted to sell short Investors must pay accrued intesst for a secondary market purchase of tax anticipation notes Which of the following is not used to determine the winning bid in a competitive bond offering? a. the result is the net interest cost for this issue. Coincident indicators change with the eonomy as a whole and since industrial production comprises a large amount of the economy and therefore changes at the sam tiem as the whole ecnomy Copies of official statements need not be retained since the MSRB does not have the authority to regulate issuers and therefore cannot require the preparation of an official statement. (10-7) Since the bond has been called. (10-9) Cash flow is net income plus depreciation.

In a noncontributory pension plan. Auction rate securities (ARSs) do not have this feature. (11-32) Upon exercise. His sale at $94 per share results in a profit of $1. In addition. (16-8) Random lot selection is the method used to call term bonds A long margin account must maintain an equity equal to 25% of the market value. Registered) See also: Certificate.$83 cost] x 100 shares). (17-13) A total withdrawal from a nonqualified annuity results in two separate tax treatments. ARSs use an auction process to reset the interest . The erroneous report rule states that should a discrepancy exist between the reported execution price and the actual execution price. (vs. The account is $500 below the minimum ($2. (13-7) A bearer bond does not require endorsement by the owner BEARER BOND (S7) A bond which does not have the owner's name registered on the books of the issuer. (19-8) AMBAC insures new municipal issues A young woman of low income that has 5K to ptu for her young sons college education shoud luse a zero coupon bond An investment in an oil and gas drillingporgram would generate the largest decuction from intangible drilling costs Exercise limits relate to the maximum number of contracts that an individual may exercise during a five business day period for each underlying stock on each side of the market. the actual execution price shall prevail. For tax purposes. not for each account at each firm. Earnings in the plan accrue tax-deferred (are not taxed until received by the employee) and any benefits received are taxed as ordinary income. Using SMA will increase the debit balance and therefore reduce equity. Exercise and position limits apply cumulatively to all accounts that a customer maintains at all brokerage firms. and if the auction fails the investor may not have immediate access to their funds. Interest and principal.500 required minus $2. The original amount invested is treated as a return of capital and the earnings in the account (amount above the original investment) is treated as ordinary income.25. the customer must accept the actual execution price of 39.7 premium). only VRDOs have a put feature that permits the holder to sell the securities back to the issuer or third party. Therefore. the employee does not make contributions. Interest is paid by means of attached coupons. Mr. (21-18) A stocks portfolios volatility compared to the market as a whole is the BETA Although they are both long-term securities with short-term trading features. Hedge is obligated to purchase 100 shares of DOG. his cost is $83 per share (90 strike price . when due.000 equity).100 ([$94 sale price . are payable to the holder.

For a purchase. the minimum equity requirement is the lesser of $2. industry rules require a minimum equity (deposit) of $2.000 or 100% of the purchase price. whereas the reset interest rate on a VRDO is set by the dealer at a rate that allows the securities to be sold at par value.rate on the securities. (13-14) .000. (8-19) If the initial transaction in a margin account is a short sale.

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