Question 1

Initial margin deposit minimum requirements are set by the:

Accepted Answer

A) NYSE 
B) FINRA 
C) FRB 
D) FDIC

Question 2

Call loans made by banks to broker/dealers are generally for the purpose of which of the following?

Accepted Answer

A) expansion of office facilities 
B) meeting operating expenses 
C) carrying margin accounts 
D) financing securities held in inventory

Question 3

Bubba wants to buy 500 shares of an NYSE listed stock at 38.87 but he wants to buy at one time, right away, or else forget it. What kind of order should the registered representative enter?

Accepted Answer

A) fill or kill 
B) all or none 
C) immediate or cancel 
D) now or never

Question 4

Which of the following is a right for shareholders of common stock?

Accepted Answer

A) the right to have the stock price increase 
B) the right to vote about important matters of the company 
C) the right to dividends 
D) both B and C

Question 5

For what time period does a Form 144 remain in effect?

Accepted Answer

A) 30 days 
B) 60 days 
C) 90 days 
D) one year

Question 6

Big Guns Municipal Bond Dealer Corporation buys 100M of 7% 20-year GO bonds at par. The bonds are marked up and immediately re-offered for sale. Which of the following re-offering prices would probably be deemed excessive?

Accepted Answer

A) 6.8% net 
B) 6.9% less 0.5 
C) $100.75 
D) 5.00% net

Question 7

A stock with a current P/E of 17 is selling at $74.50 per share. What are the company's earnings in the trailing 12 months?

Accepted Answer

A) about $4.28 
B) $6.20 
C) $1.70 
D) impossible to calculate from this information

Question 8

Which of the following is true about a customer with a frozen account?

Accepted Answer

A) may not trade corporate securities under any circumstances 
B) may make purchases but not sales of corporate securities 
C) must deposit the full purchase cost before an order is executed 
D) must deposit sufficient cash for each transaction no later than the settlement date

Question 9

Which of the following is considered a firm quotation in the over-the-counter market?

Accepted Answer

A) 27.50 
B) 27.50 workout 
C) 27.50 subject 
D) both B and C

Question 10

A treasury obligation having no fixed rate of interest with a thirty day maturity due April 22 is most likely a:

Accepted Answer

A) treasury note 
B) tax anticipation bill 
C) Series H bond 
D) Series EE bond

Question 11

In the distribution of a new issue underwriters or selling group member are prohibited from:

Accepted Answer

A) selling to the public at the so-called public offering price 
B) selling to another broker or dealer who needs to fill an accommodation order 
C) withholding blocks of a new issue in the member's account 
D) all of the above

Question 12

Which of the following receives the highest priority of a municipal bond trustee when applying income and revenue derived from a financed toll facility?

Accepted Answer

A) renewal and replacement fund 
B) operation and maintenance fund 
C) bond service account fund 
D) reserve maintenance fund

Question 13

Bubba's pledge to purchase a specified dollar amount of a mutual fund within a specified period of time is called:

Accepted Answer

A) a promissory note 
B) a letter of intent 
C) an investment letter 
D) a stock power

Question 14

Bubba wants to buy a $4 convertible preferred with that has a $50 par value and is exchangeable for common stock at $47.50. If the preferred stock is trading at 52, what does Bubba calculate as the common stock price in order to be at parity with the preferred?

Accepted Answer

A) 47.50 
B) 52.00 
C) a little less than 49.38 
D) a little more than 54.50

Question 15

Which of the following are considered to be discretionary orders under the FINRA Rules of Fair Practice?

Accepted Answer

A) a customer instructs her registered representative to purchase stock in XYZ whenever the representative deems the price to be right 
B) a customer instructs her registered representative to sell 300 shares of ABC that is long in her account whenever the representative thinks the time and price are appropriate 
C) a customer gives a member firm a check for $25,000 and instructs the firm to purchase bank stocks and insurance company stocks when the prices appear to be favorable 
D) both A and C

Question 16

In which of the following situations may exemption from compliance with Regulation T be granted?

Accepted Answer

A) a broker/dealer who does not offer margin accounts 
B) a broker/dealer conducts business only in registered securities 
C) a broker/dealer transacting less than 10% of its business through a member of a securities exchange 
D) none of the above

Question 17

Revenue bonds are least likely to provide constructions funds for:

Accepted Answer

A) a toll highway 
B) an airport 
C) a public school 
D) a pollution control facility

Question 18

The market theory stating that the small investor is usually wrong is called the:

Accepted Answer

A) advance-decline theory 
B) odd-lot theory 
C) Dow theory 
D) short interest theory

Question 19

Bubba buys "double-barreled" municipal bonds. What is the source of guaranteed repayment on these bonds?

Accepted Answer

A) a specific municipal project plus a federal subsidy 
B) two specific municipal projects 
C) all projects of the issuing municipality 
D) one specific municipal project plus the full financial strength of the issuer

Question 20

Which of the following options positions is characteristic of a short straddle?

Accepted Answer

A) long one put and short one call 
B) long one call and short one put 
C) long one call and long one put

Exam 2: Investment and Securities