Question 1

Regulation T is set at 50%. Bubba's account contains long positions in the following securities with the prices listed
100 ABC $30
200 XYZ $70
200 QBB $40
200 KKK $25
Total market value = $30,000
Debit balance in the account = $12,000
Net equity balance of the account = $18,000
If Bubba wants to buy 100 shares of DUM at $30 per share, how much additional money must be deposited?

Accepted Answer

A) $3,000 
B) $1,500 
C) $2,000 
D) $0

Question 2

For an FINRA member firm to exercise discretionary power in any customer account requires written authorization by that customer except when:

Accepted Answer

A) the customer is a spouse of the registered representative 
B) the customer has given an oral approval after the transaction 
C) only time and price of execution are involved 
D) both B and C

Question 3

In mid-September, Bubba sells one XYZ February 50 call at $6. It subsequently expires without being exercised. How is the premium taxed?

Accepted Answer

A) Bubba's cost of the underlying stock is reduced 
B) the $600 premium is a capital gain 
C) the $600 premium constitutes ordinary income 
D) the $600 premium is rolled over into another XYZ call with the next longest expiration date.

Question 4

Which of the following is a benefit of Section 8 low-income housing partnerships?

Accepted Answer

A) high, reliable income 
B) large deductions 
C) potential for capital appreciation 
D) low risk

Question 5

Bubba holds 200 shares of common stock in a utility company and receives rights to subscribe to an additional 100 shares at $20. The utility company is raising $40 million of new capital. How many rights does Bubba receive?

Accepted Answer

A) 20 
B) 50 
C) 100 
D) 200

Question 6

In a securities underwriting a participating firm is said to be liable severally but not jointly. What is this type of underwriting is called?

Accepted Answer

A) a Western account 
B) an Eastern account 
C) a best efforts offering 
D) an all or none offering

Question 7

Under Regulation T, when must money be deposited to cover requirements for Bubba's new purchases on margin?

Accepted Answer

A) no later than the fifth business day after the trades 
B) no later than the seventh business day after the trades 
C) on the day of the trades 
D) on the next business day following the trades

Question 8

Bubba Corporation owes income tax. Which of the following may be tendered at par value for payment of the tax?

Accepted Answer

A) term bond 
B) tax anticipation bill 
C) special tax bond 
D) pre-issue bond

Question 9

Which of the following statements regarding mutual funds is true?

Accepted Answer

A) the custodian can also be the transfer agent 
B) the sponsor receives a management fee based on the fund's total assets 
C) the terms "management company" and "investment advisor" are interchangeable 
D) the management company receives a portion of the sales load for managing the fund assets

Question 10

A syndicate manager has just been informed that its bid has been accepted and all syndicate members are duly notified. Public information on the award will be most quickly available from:

Accepted Answer

A) the Blue List 
B) the daily Bond Buyer 
C) the Wall Street Journal 
D) Munifacts

Question 11

Book value of a corporation is also know as:

Accepted Answer

A) net tangible asset value per share 
B) intangible value 
C) par value 
D) dilution value

Question 12

The accounting statement that represents a company's financial position on a particular date is the:

Accepted Answer

A) income statement 
B) balance sheet 
C) Profit and Loss 
D) cash flow statement

Question 13

Which of the following types of investment companies pays out 90% of its net investment income to shareholders?

Accepted Answer

A) diversified 
B) registered 
C) regulated 
D) balanced

Question 14

Which of the following does not appear in a municipal syndicate letter to underwriters?

Accepted Answer

A) the specific bid and offering terms of the issue 
B) the amount of each member's participation 
C) the extent of the manager's authority in directing the offering 
D) the duration of the syndicate account

Question 15

Regulation T is set at 50%. Bubba's account contains long positions in the following securities with the prices listed
100 ABC $30
200 XYZ $70
200 QBB $40
200 KKK $25
Total market value = $30,000
Debit balance in the account = $12,000
Net equity balance of the account = $18,000
Bubba wants to buy 100 shares of DUM at $30 per share and 100 shares of OUT at $120. How much how much value of additional securities must Bubba deposit in lieu of depositing cash?

Accepted Answer

A) $3,000 
B) $6,000 
C) $9,000 
D) $15,000

Question 16

Which of the following is not an investment company within the terms of the Investment Company Act of 1940?

Accepted Answer

A) a holding company dealing in mineral leaseholds 
B) a face-amount certificate company 
C) a unit investment trust company 
D) a management company

Question 17

An "accumulation unit" of a variable annuity is used to determine which of the following?

Accepted Answer

A) the value of the annuitant's contract before annuity payments begin 
B) the amount of annuity payments to be paid to the owner 
C) the amount to be passed to the annuitant's beneficiary 
D) the amount returned to the annuitant upon redemption of the account

Question 18

Which of the following is not a marketable security?

Accepted Answer

A) tax anticipation bonds 
B) municipal bonds 
C) treasury bonds 
D) Series EE bonds

Question 19

The Bubba Corporation is offering stock to the public for the first time. The registration statement lists 150,000 shares for sale at $400 per share. The company conducts business in a 100-mile radius that includes towns in two neighboring states. Which of the following information is not required in the preliminary prospectus for this offering?

Accepted Answer

A) a notice in red ink to the effect that the prospectus has not been approved by the SEC 
B) a section describing how the funds from the sale will be used 
C) a statement of the company's assets and liabilities 
D) the price at which the issue is offered

Question 20

Partnership democracy is:

Accepted Answer

A) a prohibition against control by a single partner 
B) the sharing of management by all partners 
C) permission granted to the general partner to act outside the partnership agreement 
D) a synonym for silent partner

Exam 2: Investment and Securities