Master Test #5. P&C. Questions and answers. 2022/2023. Rated A.

Master Test #5. P&C. Questions and answers. 2022/2023. Rated A. When a bond is called, the bondholder receives the: A) Call price B) Call price plus accrued interest C) Market price D) Market price plus accrued ...

Master Test #5. P&C. Questions and answers. 2022/2023. Rated A. When a bond is called, the bondholder receives the: A) Call price B) Call price plus accrued interest C) Market price D) Market price plus accrued interest - ✔✔B) Call price plus accrued interest A 65-year-old individual takes a lump-sum distribution from a non-qualified variable annuity. This withdrawal would be: I. Subject to a 10% II. Fully taxable at the investor's tax bracket III. Treated as a capital gain for tax purposes IV. Partially taxable at the investor's tax bracket A) II only B) IV only C) I and III only D) I and IV only - ✔✔B) IV only A buy stop order would be entered: I. Below a support level II. Above a resistance level III. To limit a loss on a long stock position IV. To limit a loss on a short stock position A) I and III B) I and IV C) II and III D) II and IV - ✔✔D) II and IV Which of the following would NOT be considered a joint account? I. Two unrelated individuals as tenants in common II. Husband and wife as tenants with rights of survivorship III. An investment club managed by an investment adviser IV. A mother and her minor child in an account under the UTMA A) III only B) I and II only C) III and IV only D) I, III, and IV only - ✔✔C) III and IV only When analyzing a mutual fund's expenses, an analyst would look at all of the following EXCEPT: A) The management fees charged by the investment adviser B) The fees charged by the fund's custodian C) The fund's expense ratio D) The sales load charged to buy fund shares - ✔✔D) The sales load charged to buy fund shares A mutual fund's portfolio is comprised of GNMA securities. The fund also writes covered GNMA calls to increase the fund's overall return. Distributions to shareholders will be taxed as: A) Ordinary income only B) Capital gain only C) Tax exempt income D) Ordinary income and capital gain - ✔✔D) Ordinary income and capital gain The FRB would most likely sells securities if it were attempting to: A) Ease credit B) Increase money supply C) Stop an inflationary trend D) Reduce interest rates - ✔✔C) Stop an inflationary trend Which of the following best describes the term payment for order flow? A) The concession paid to a member of a selling group B) The prohibited practice of mutual fund distributors paying kickbacks to registered reps C) The portions of a mutual fund's 12b-1 fee that is paid to a third party salesperson D) The payment to a broker-dealer by a market maker in return for routing orders to that market maker - ✔✔D) The payment to a broker-dealer by a market maker in return for routing orders to that market maker In reviewing prices for a mutual fund, an investor notices that the Beacon Fund has two listing, one for Class A shares and the other for Class B shares. The distinction between the two classes of shares would most likely be: A) Class A shares are oriented toward short-term trading, while Class B shares have a long-term perspective B) Class A shares should be purchased by income-oriented investors, while Class B shares are for those seeking capital appreciation C) Class A shares can be purchased directly from the fund, while Class B shares are offered through broker-dealers D) Class A shares have a front-end sales charge, while Class B shares have a contingent deferred sales charge - ✔✔D) Class A shares have a front-end sales charge, while Class B shares have a contingent deferred sales charge When determining the position limit, the member firm will aggregate which two of the following positions? I. Long calls and long puts II. Long calls and short puts III. Short calls and short puts IV. Short calls and long puts A) I and II only B) I and III only C) II and III only D) II and IV only - ✔✔D) II and IV only On the morning of January 5th, the DJIA traded up 5% from the previous day's close. The market then sold off and the index was down 6% from the pervious day's close. Which of the following statements is TRUE? A) Trading will be halted immediately B) Trading will not be halted C) Trading will be halted for one hour D) Trading will be only be allowed by institutional customers - ✔✔D) Trading will be only be allowed by institutional customers A customer purchases 1,0000 shares of ATT stock at 30 requiring a $15,000 deposit in his margin account. On the payment date, ATT is selling at 35 per share but the customer has not paid for the transaction. Which of the following actions would be considered freeriding? A) Depositing $30,000 of fully paid IBM stock to pay for the ATT stock B) Depositing $15,000 cash into the account and then liquidating the shares at 35 C) Liquidating the stock at 35 and using the sale proceeds to pay for the $15,000 margin requirement D) Requesting an extension, if there is a legitimate reason to do so - ✔✔C) Liquidating the stock at 35 and using the sale proceeds to pay for the $15,000 margin requirement A state agency revenue bond does not have sufficient revenue to meet debt service. A provision of the indenture allows the agency to request funds from the state legislature. The legislature has the option of providing or not providing the additional funds. What type of bond is it? A) General obligation B) Double Barreled C) Special tax D) Moral obligation - ✔✔D) Moral obligation A self-employed individual has total income of $120,000. If thee individual wants to open a Keogh plan: I. It must be opened by the time he files his tax return II. It must be open by the end of the tax year III. A maximum deductible contribution of $24,000 is permitted IV. A maximum deductible contribution of $49,000 is permitted A) I and III B) I and IV C) II and III D) II and IV - ✔✔C) II and III A corporation with an excellent earnings record has several issues of bonds outstanding. During a period of stable interest rates, which of the following bonds would be expected to fluctuate the most? A) Mortgage bonds B) Equipment trust bonds C) Debenture bonds D) Convertible bonds - ✔✔D) Convertible bonds Which two of the following persons would be permitted to purchase an equity IPO? I. An employee of a FINRA member whose sister is a director of the issuer II. A portfolio manager of a mutual fund purchasing for his personal account III.Employees of the issuer if the issuer is a FINRA member IV. An attorney hired by the issuer to assist in the IPO A) I and II B) I and III C) II and III D) II and IV - ✔✔B) I and III An XYZ Corporation convertible bond is selling in the market at $1,248.75. It is convertible at $30. XYZ common stock's market price is 37.50. The bond has been called at 103. Which of the following is the least attractive alternative for a holder of the bond? A) Sell the bond B) Convert to common and sell the common C) Allow the bond to be called D) Convert common stock to a bond - ✔✔C) Allow the bond to be called The Trust Indenture Act of 1939 regulates: I. A purchase of $5,000,000 of Treasury bonds II. A private placement of $3,000,000 of corporate notes III. A $20,000,000 sale of corporate bonds sold interstate IV. A sale by a brokerage firm throughout the country of $25,000,000 of corporate debentures A) I and II only B) I and III only C) III and IV only D) I,II, III, and IV - ✔✔C) III and IV only A Treasury bond is quoted 105.04-105.24. The purchase price that customer would expect to pay would be: A) $1,051.25 B) $1,052.40 C) $1,054.00 D) $1,057.50 - ✔✔D) $1,057.50 A bond is convertible into stock at $50 per share. The market price of the stock is 65. The market price of the bond is 120. To profit from this arbitrage opportunity, an investor should: I. Buy 5 bonds II. Buy 100 shares of stock III. Sell 5 shares of stock IV. Sell 100 shares of stock short A) I and III B) I and IV C) II and III D) II and IV - ✔✔B) I and IV Keystone Chocolate Co. plans to sell shares of new issue only in the state of Pennsylvania. In order to qualify for a registration exemption under Rule 147, what percentage of the corporation's asset must be located in Pennsylvania, and what percentage of its revenues must be derived from Pennsylvania sources, at the time of the offering? A) 70% B) 80% C) 90% D) 100% - ✔✔B) 80% When interest rates are trending upward, the economy would normally be in which phase of the business cycle? A) Expansion B) Contraction C) Trough D) Peak - ✔✔A) Expansion While saving for her retirement, a variable annuity owner investing $1,000 per month will buy a: A) Fixed number of annuity units B) Fixed number of accumulation units C) Varying number of annuity units D) Varying number of accumulation units - ✔✔D) Varying number of accumulation units A registered rep wishes to prepare advertising to be sent to clients concerning the investment merits of CMOs. In this piece, the rep plans to compare CMOs to other types of investments so that clients will better understand the product. According to industry rules, which of the following statements regarding the advertising is correct? A) Such advertising would be prohibited due to the diverse audience likely to receive it B) The rep may prepare the ad and compare CMOs to other investments if the comparison helps the product be better understood by clients C) The rep may prepare the ad but may only compare CMOs to similar products such as mortgage pools D) The rep may prepare the ad but may not compare CMOs to any other security - ✔✔D) The rep may prepare the ad but may not compare CMOs to any other security To whom may a registered representative appeal a finding by a Hearing Panel? A) The National adjudicatory Council B) The SEC C) A federal appeals court D) There is no appeal allowed - ✔✔A) The National adjudicatory Council A corporation has a 9% cumulative preferred stock issue outstanding. The company paid a $7 dividend in 2002 and $8 in 2003. If the company wants to pay a common stock dividend in 2004, the cumulative preferred stockholder must first receive a dividend of: A) -0- B) $3 C) $9 D) $12 - ✔✔D) $12 An individual's home has a resale value of $500,000 and an assessed value of $200,000. If the tax rate is 10 mills, the property tax would be: A) $2,000 B) $5,000 C) $20,000 D) $50,000 - ✔✔A) $2,000 A person who invests in a variable annuity would be most concerned with the performance of the insurance company's: A) General account B) Separate account C) Credit rating D) Profitability - ✔✔B) Separate account A customer is willing to accept a partial execution on an order to buy 800 shares of XYZ stock 30. This order should be entered as: A) Buy 800 XYZ NH B) Buy 800 XYZ at 30 IOC C) Buy 800 XYZ at 30 Day Order D) Buy 800 XYZ at 30 GTC - ✔✔B) Buy 800 XYZ at 30 IOC Which of the following orders would you place for a customer who wants to hold her auction rate security if the interest rate is set at 3.4% of higher: A) Hold order B) Limit order C) Bid order D) Sell Order - ✔✔C) Bid order All if the following are part of the Federal Farm Credit System EXECPT: A) Banks for cooperatives B) Federal Intermediate Credit Banks C) Federal Lands Bank D) Federal National Mortgage Association - ✔✔D) Federal National Mortgage Association A municipal dealer purchased $100,00 face value of 6.00% bonds at a 6.00 basis. If the dealer reoffered the bonds, which of the following could be considered reasonable? I. 101 II. 108 III. 5.80 basis IV. 4.00 basis A) I and II only B) I and III only C) III and IV only D) I, III, and IV only - ✔✔B) I and III only Which of the following best describes a BA? A) It facilitates the trading of foreign stocks in the United States B) It helps to finance foreign trade between importers and exporters C) It is used by a municipal issuer in raising funds to meet a seasonal need cash D) It is issued by nondomestic banks and is secured by Eurodollar deposits - ✔✔B) It helps to finance foreign trade between importers and exporters ABC P25.13 + .25 B 25 A 25.25 Excluding any markups, what price would a customer pay to purchase the security? A) 25 B) 25.13 C) 25.25 D) 25.38 On which exchange did the last transaction take place? A) New York B) American C) Philadelphia D) Pacific - ✔✔C) 25.25 D) Pacific All of the following are true about zero-coupon corporate bonds EXCEPT: A) It has no reinvestment risk B) The bondholder receives all interest at maturity C) The bondholder pays tax each year on the accretion D) It would be suitable investment for a customer who needs cash flow - ✔✔D) It would be suitable investment for a customer who needs cash flow A registered representative opens an option account for a customer on October 1st and buys 5 ABC November 30 calls at 4. On October 16th,