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NEW QUESTION 202
A corporate bond is quoted as having a net change in value of plus one point. By how much did the bond
price increase?
- A. $1
- B. $100
- C. $1,000
- D. $10
Answer: D
Explanation:
$10. A point is 1% and bonds are priced in $1,000 increments. Multiplying $1,000 by 1%
equals $10.
NEW QUESTION 203
Provisions of SEC Rule 145 normally apply to an exchange of one security for another as a result of:
- A. a "no-sale" ruling issued by the SEC
- B. a change in par value
- C. a merger
- D. a stock split
Answer: C
Explanation:
a merger. Rule 145 basically applies to mergers, consolidations, and acquisitions.
NEW QUESTION 204
A management group may serve an investment company as its:
- A. custodian
- B. underwriter
- C. both A and C
- D. investment advisor
Answer: C
Explanation:
both A and C. The custodian must be independent of the investment company.
NEW QUESTION 205
Municipal syndicate allocation procedures are described in which of the following?
- A. agreement among the underwriters
- B. official statement
- C. syndicate account letter
- D. underwriting agreement
Answer: C
Explanation:
syndicate account letter. This letter is sent by the manager of a competitive bid syndicate to
the other members. The priority and other procedures, including allocation amounts, are specified in the
letter. Members signify acceptance by signing the letter and returning it to the manger.
NEW QUESTION 206
Which of the following is normally the largest asset of a manufacturing company?
- A. sales
- B. notes receivable
- C. accounts receivable
- D. inventory
Answer: D
Explanation:
inventory. A manufacturer will normally have more inventory than accounts receivable and
notes receivable. Sales is not an asset category.
NEW QUESTION 207
To accommodate a customer's order to buy an over-the-counter stock, a broker/dealer is permitted to:
- A. sell these shares short to the customer
- B. act as agent on this transaction
- C. all of the above
- D. sell him shares from the firm's inventory
Answer: C
Explanation:
all of the above. All of the choices are normal ways for the broker to fill the customer's order.
NEW QUESTION 208
Which of the following are considered to be discretionary orders under the FINRA Rules of Fair Practice?
- A. 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 - 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. both A and C
- D. a customer instructs her registered representative to purchase stock in XYZ whenever the
representative deems the price to be right
Answer: C
Explanation:
both A and C. Choice A is discretionary because the customer did not specify a quantity to
purchase. Choice B only provides discretion about timing and thus is not discretionary. Choice C is clearly
discretionary.
NEW QUESTION 209
Although a corporation has no earnings in a particular year, it is obligated to pay interest on all its
outstanding debt except the following:
- A. collateral trust bonds
- B. convertible subordinated debentures
- C. equipment trust certificates
- D. adjustment bonds
Answer: D
Explanation:
adjustment bonds. These bonds are also known as income bonds. Interest is paid only if
there is income.
NEW QUESTION 210
Which of the following sets of prices is that of a closed-end investment company?
- A. $20.15 $21.85
- B. $7.50 $8.10
- C. $28.14 $27.75
- D. $10.10 $11.00
Answer: C
Explanation:
NAV=$28.14 and Asked Price=$27.75. In this case the ask price is less than NAV, which is
never true of an open-end investment company.
NEW QUESTION 211
Which of the following price quotes is representative of a treasury bill?
- A. 5.55 - 5.75
- B. 98.9 - 100
- C. 96 - 961/2
- D. 5.78 - 5.73
Answer: D
Explanation:
5.78 - 5.73. Prices for treasury bills are quoted as percentage yields. A quotation in yield
means the first price in the spread - the bid price - should be higher than the offer price. A higher yield
means a lower price.
NEW QUESTION 212
The total assets of a corporation are $840,000, of which $350,000 are current items. Total liabilities are
$ 460,000, of which $290,00 are fixed obligations. How much is the corporation's working capital?
- A. $110,000
- B. $380,000
- C. $60,000
- D. $180,000
Answer: D
Explanation:
$180,000. Subtract current liabilities from current assets. Current liabilities are $170,000
($460,000 - $290,000).
NEW QUESTION 213
A front-end loan mutual fund plan is most suitable for:
- A. an automatic withdrawal plan
- B. a voluntary accumulation plan
- C. a contractualplan
- D. an optional withdrawal plan
Answer: C
Explanation:
a contractual plan. The other choices are not suitable. In a voluntary accumulation plan, the
load is level. In an automatic withdrawal plan, the load is front-end because the bulk of the sales charge is
taken early in the life of the plan.
NEW QUESTION 214
A trust instrument drawn pursuant to the Trust Indenture Act of 1939 sets forth which of the following?
- A. the rights of stockholders
- B. the obligations of the issuing corporation
- C. both B and C
- D. the duties of the trustee
Answer: C
Explanation:
both B and C. A trust indenture does both of these but does not define the rights of
stockholders.
NEW QUESTION 215
Which of the following are not flat rate taxes?
- A. excise tax
- B. general income tax
- C. gasoline tax
- D. gift tax
Answer: D
Explanation:
gift tax. By definition, gift tax is a progressive tax. All of the others are a level percentage.
NEW QUESTION 216
Under an initial federal requirement of 70% equity, Bubba purchases 100 shares of XYZ at $40 per share
and wishes to satisfy the margin call by delivering another listed security into his account. He may do so
by depositing stocks with a market value of:
- A. $2,800
- B. $9,333
- C. $4,000
- D. $5,714
Answer: B
Explanation:
$9,333. If Bubba were depositing cash, he would need $2,800 (70% x $4,000). Since he is
depositing stock, he would have to deposit enough with loan value of $2,800. To arrive at this, divide
$ 2,800 by the 30% loan value to obtain $9,333.
NEW QUESTION 217
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?
- A. impossible to calculate from this information
- B. $1.70
- C. about $4.28
- D. $6.20
Answer: C
Explanation:
about $4.28. Divide the market price by the P/E.
NEW QUESTION 218
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?
- A. a little more than 54.50
- B. 52.00
- C. 47.50
- D. a little less than 49.38
Answer: D
Explanation:
a little less than 49.38. Bubba needs a calculator to divide the par value of the preferred
stock by the price of the common stock. He then divides the result into the price at which the preferred
stock is trading.50 divided by 47.50 = 1.05352 divided by 1.053 = 49.38
NEW QUESTION 219
Bubba Corporation has a registered public offering of 750,000 shares at $40. An underwriter of 30,000
shares is advised by the manager that its retention will be 70%. How many shares may the underwriter
sell to its own customers?
- A. 30,000
- B. as many as it can up to a maximum of 51,000
- C. 9.000
- D. 21,000
Answer: D
Explanation:
21,000. The underwriter is permitted to retain 70% of the 30,000 shares. The remaining
9 ,000 shares are kept in the pot by the manager.
NEW QUESTION 220
The definition of debentures is:
- A. a loan secured by real estate
- B. securities backed by the general credit of the issuers but no specific collateral
- C. a worthless security
- D. collateralized securities
Answer: B
Explanation:
securities backed by the general credit of the issuers but no specific collateral. And in the
case of some issuers, that may be fairly worthless.
NEW QUESTION 221
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