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1) A broker-dealer's customer has opened a new long margin account by buying $10,000 of XYZ stock and making the required Reg. "T" (50%) deposit. When the broker-dealer rehypothecates the customer's stock, how much of the securities may be pledged?    
  (a) $14,000 (b) $10,000 (c) $5,000 (d) $7,000
Rehypothecation by the broker dealer means that the firm is pledging customer's street-name securities, purchased on margin, to a bank as collateral for a loan. The Federal Reserve Board Rule stipulates that the broker dealer may rehypothecate (pledge) 140% of the customer's debit balance. In this question, the customer bought $10,000 and made the required 50% deposit, so the broker-dealer loaned the customer $5,000 to pay for the stock—that is the initial debit balance. The broker-dealer rehypothecates the customer's stock ($5,000 × 140% = $7,000), pledging it as collateral for a loan.

2) Which of the following types of orders never appear in the specialist's book?    
  (a) GTC (b) Stop limit (c) Not held (d) Stop
A not held order gives the floor broker the responsibility of executing an order and choosing the best time and price for execution. The floor broker, however, is not held responsible for a specific time or price. Floor brokers must execute such orders themselves and may not leave them with the specialist for execution. All of the other orders are normal orders in the specialist's book
3) Which of the following automated order handling systems is associated with the NYSE?    
  (a) Super Montage (b) Super Fast (c) Super SLD (d) Super DOT
The DOT (Designated Order Turnaround) system is the NYSE's automated execution system designed to handle market orders by routing them directly from the member firm to the appropriate specialist electronically. Super Montage system is a Nasdaq system. The other choices do not exist.

4) A registered representative is explaining the details of a new municipal offering to a client. She explains that the debt service for the bond will be paid from taxes collected from the sales of tobacco and alcohol. This type bond is known as which of the following?    
  (a) Full faith and credit bond (b) Moral obligation bond (c) Special tax bond (d) Special assessment bond
Special tax bonds are a form of municipal revenue bonds, sometimes called "sin tax" bonds because the revenues are from excise taxes on commodities such as alcohol and tobacco—gasoline taxes are also included

If a customer has directed the following transactions, what is the strategy called and what is the objective?

Buy 1 MSM Sep 40 Call @ 5 Long 1 MSM Sep 40 Put @ 4I. Call spread
II. Long straddle
III. Take advantage of market volatility
IV. Take advantage of a flat market in the stock
  (a) I, IV (b) II, IV (c) I, III (d) II, III
When a customer buys a call and a put on the same stock with the same strike price and same expiration, this is called a straddle. Because the customer is buying both contracts, the straddle is long.  The customer who enters this order expects great volatility - either up or down - because the stock has to move enough above or below the common strike price for a breakeven

Although organizations differ in their internal practices, which of the following correctly represents the typical flow of a customer's order through a broker-dealer's office?

I. Margin department
II. Wire Room
III. Cashier
IV. Purchases and Sales    
  (a) II, I, III, IV (b) II, IV, I, III (c) I, II, III, IV (d) IV, II, I, III
The order goes through the Wire Room for transmittal to the appropriate trading desk/market. The Purchases and Sales department creates the follow-up documents, including confirmations. All orders go through the Margin department to account for the funds.  Finally the order ticket goes to the Cashier where securities and money are transferred.
7) If a municipal bond is delivered "ex-legal", what does this signify?    
  (a) The secondary market bond trade is being done without a copy of the legal opinion being delivered to the buyer. (b) The bond counsel's legal opinion was an unqualified opinion. (c) The issuer of the bond has not yet received the legal opinion from the bond counsel. (d) This is not good delivery under the MSRB rules
The term ex-legal describes a municipal bond trade in the secondary market without a copy of the legal opinion provided. When municipal bonds were in their definitive form (there was an actual certificate), the legal opinion was printed on the back of the bond. Ex-legal delivery is common when there is no certificate
8) Which of the following would not be included in a "when, as, and if issued confirmation"?

I. Extended principal
II. Accrued interest
III. Settlement date
IV. Total dollar amount
  (a) II, III, IV (b) I, II, III, IV (c) I, IV (d) III, IV
A  "when, as, and if issued confirmation" - or WI confirmation - is confirming a trade in a new issue that has been authorized but not yet issued. Because the settlement date is unknown, accrued interest cannot be calculated. If the accrued interest is unknown, the total dollar amount cannot be calculated
9) Which of the following BEST describes the difference between all-or-none (AON) orders and immediate-or-cancel (IOC) orders:    
  (a) AON orders can be market or limit orders (b) AON orders must be executed in their entirety (c) IOC orders can be market or limit orders (d) IOC orders give the trader or floor broker time and price discretion
AON require complete execution; IOC orders allow partial executions
An investor has placed an order through her registered representative to buy 10,000 shares of ZBT stock at $35, at the RR's suggestion, the order was submitted as AON.  What would be the reason for marking the order in this manner?    
  (a) To save on commissions (b) To be sure that the order, if not executed immediately, is canceled (c) As a note to the specialist to execute the order without regard to priority (d) As a means of informing the firm’s floor broker that the order must be executed entirely by the end of the business day
Explanation: An All-Or-None (AON) order must be filled in its entirety or not at all.  It differs from an Immediate-Or-Cancel or a Fill-Or-Kill, order in that it is not automatically canceled if not executed at once.  If the entire order is executed with one transaction for all the shares, the customer will save money on commissions compared with piecemeal execution.
11) A bond trader at SYC Securities sees in a dealer inventory that another municipal bond trading firm, LTP, has quoted $500,000 city of Burney GO bonds at 102 ½ . He calls LTP and negotiates a price of 102 ¼ for the entire inventory. LTP's trader tells the SYC trader that the quote is firm for one hour with a five-minute recall. During the hour, another firm, TBC, calls LTP and is willing to buy the entire inventory at the original quote of 102 ½. The quoting dealer, LTP, will:

I. make the trade since the new offer meets the original quote.
II. tell the trader at TBC that the bonds are out firm.
III. give TBC five minutes to improve their offer.
IV. call SYC and tell the trader there that he/she has five minutes to execute a transaction against the quoted price.
  (a) I (b) II, IV (c) II, III (d) III
This complex question describes how a situation might develop in a municipals trading firm. The quote that was "firm for one hour with a five-minute recall," means that the price will be held firm for one hour, but if a better offer comes in the firm will get a call saying that they have five minutes to make the trade. To the trading firm that inquired after the firm quote was given, the trader will say that the bonds are "out firm," meaning that a firm quote to another dealer is pending
12) Which of the following is (are) TRUE of stop orders:

I.      It is an order to buy a stock at the market price when the price rises to a certain level or to sell a stock at the market price when the price falls to a certain level.
II.      A stop order to buy or sell securities at the current market price will be filled as long as there is a market for the security.
III.      A stop order buys or sells securities at a specified price.
IV.      A stop-limit order buys a stock at a specified price, rather than a stop order, where the price must rise to a certain level before the order is entered.
  (a) I and III only (b) IV only (c) II and III only (d) I only

Stop orders become market orders once the stock's price has surpassed a particular point. This type of order is often entered by investors who are leaving for holidays or will be unable to monitor their portfolio for an extended period of time. Though helpful, they cannot guarantee the desired entry or exit points. 

Stop-limit orders become limit orders once the stock has reached the stop price or better. The limit order then becomes a market order once the limit price (or better) has been reached. A stop-limit has essentially combined the features of a stop order, and a limit order.
13) A registered representative receives a call from Jane, who has had a JTWROS account with her husband, Joe. She tells the RR that Joe has passed away, and that she wants to sell enough XYZ stock from margin account to bring the debit balance to zero. Which of the following actions should the representative take?    
  (a) Check with the firm’s compliance department. (b) Execute the order. (c) Clear the action with the principal prior to acting. (d) Check with the executor of Joe’s estate before acting
The account is Joint Tenants With Rights of Survivorship. This means that either party can give orders independently and that, upon death of one of the parties, the survivor owns the account completely. The RR executes the order as quickly as possible.

14) Which TWO of the following are true of securities transactions in the primary market:

I.      Investors know a bond's coupon rate before they place an order
II.      A bond's coupon rate is not finalized until the offering date
III.      A stock's initial public offering date is always determined months in advance
IV.      A stock's initial public offering date is often not determined until the bulk of the buyers are already lined up.
  (a) I and IV (b) I and III (c) II and III (d) II and IV
Since future levels of interest rates and equity market conditions cannot be predicted when the issue is first planned, a bond's coupon rate and a stock's IPO are not finalized until the offering date
15) Which of the following BEST describes the information required on an order ticket:    
  (a) Buy or sell; security’s CUSIP number; client’s account number (b) Buy or sell; client’s account number; quantity of shares (c) Buy or sell; security’s CUSIP number; ticker symbol (d) Buy or sell; security’s CUSIP number; quantity of shares
The security's ticker symbol, not its CUSIP number, is used on order tickets
16) A customer of a NYSE firm has decided to open a margin account. As her first trade she buys 100 shares of LIB stock at $15 per share. With Regulation "T" at the standard 50%, what will be her minimum required deposit for this transaction?    
  (a) $2,000 (b) $1,500 (c) $750 (d) $3,500
The initial equity in a new margin account, by NYSE and NASD rules is $2,000 unless the total transaction is less than $2,000 as it is in this case. The customer, for the opening transaction will deposit the total amount of the purchase.

An investor sells short 1,000 shares of FBN stock at 1.75. Under the rules what is the investor's required deposit for this transaction?    
  (a) $1,750 (b) $2,000 (c) $2,500 (d) $3,750
Explanation: Under the so-called "cheap stock" rule, the investor who sells short stock that is priced $0 - $2.50 per share, the requirement is $2.50 per share. Selling short is a strategy that investors use when they expect the market to drop.  There isn't much room for a stock priced at $1.75 to drop.  Also, the lower-priced stocks tend to exhibit great volatility, which translates to even greater risk to the investor.
18) Which of the following BEST describes the correct timeline for settling ex-dividend trades:    
  (a) Ex-date; dividend declared; record date; distribution date (b) Dividend declared; record date; ex-date; distribution date (c) Record date; dividend declared; ex-date; distribution date (d) Dividend declared; ex-date; record date; distribution date
The board first declares a dividend, and the ex-date is usually two business days before the record date
19) A customer's long margin account appears as follows:

CMV = $50, 000
DR = $30,000

The customer calls his registered representative and places the following orders; sell $10,000 XYZ and buy $4,000 PDQ. Which of the following statements is (are) correct? (Regulation "T" = 50%)

I. The firm will retain $6,000
II. The customer's account will be credited with $3,000
III. The firm will retain $3,000
IV. The customer's account will be credited with $6,000
  (a) I, III (b) II, III (c) I (d) IV
This customer's account is restricted, which, of course means that the equity in the account is below 50% of the CMV ($50,000 CMV - $30,000 DR = $20,000 EQ) and, ($50,000 × 50% = $25,000) so the account is restricted by $5,000. In a restricted account, the firm must impose the 50% rule retention on any sales. In this case, the customer has a net sale, (Sell $10,000 -; buy $4,000 = $6,000 net sale) the retention rule requires that the firm retain 50% × $6,000 = $3,000. The customer may withdraw the remaining $3,000 or leave it in the account.

(Note: DR is the a notation for "Debit", and CMV is the notation for "Current Market Value")

20) To reduce or eliminate open long options positions, an investor will:    
  (a) Initiate additional long positions at different strike prices and/or expiration dates (b) Exercise the contracts at their intrinsic value (c) Make closing sales (d) Establish debit spread positions
To reduce or eliminate open long options positions, the investor will offset the positions by making closing sales. If the investor buys (long) to open a position, then he/she will sell the position to close it.  The order ticket will  be marked "closing sale".

  (a) The order is partially filled by a purchase of 300 shares and the remainder is cancelled. (b) The order goes on the specialist’s book as GTC (c) The order is cancelled (d) The order will be designated as DNR by the specialist An investor has placed the following order with her broker-dealer: Buy 500 shares XYZ @ 50 IOC.  When the order is presented to the trading crowd at the specialist's post, the floor broker is only able to buy 300 shares at 50.   What will be the result?
An IOC (Immediate or Cancel) order allows for partial fills. When partially filled, the remainder of the order is automatically canceled
22) Which of the following is the rule for settlement when a customer makes an opening transaction by purchasing a call contract?    
  (a) Trade date plus five business days (b) Next day settlement (c) Trade date plus three business days (d) Same day settlement
By rule, settlement for options contracts is next day
23) A broker-dealer must keep which TWO of the following for three years:

I.      All receipts and disbursements of cash and all other debits and credits.
II.      All guarantees of accounts, powers of attorney and any other evidence of the granting of discretionary authority.
III.      All repurchase and reverse repurchase agreements.
IV.      All purchases, sales, receipts and deliveries of securities and commodities for each account, and all other debits and credits to each account.
  (a) II and IV (b) I and III (c) I and IV (d) II and III
Transaction records such as receipts and disbursements of cash, and all purchases, sales, receipts and deliveries of securities, have six-year holding requirements.

24) A customer purchased restricted stock in a Regulation D private placement offering 18 months ago. She instructs the registered representative to sell as much of the stock as possible immediately. Which of the following are true?

I. The stock may not be sold for another six months.
II. The RR must file a Form 144 no later than concurrently with the sale.
III. The customer may sell an amount of her stock representing the greater of 1% of the company's outstanding stock, or the average of the past six weeks of trading volume.
IV. The customer may sell an amount of her stock equal to the greater of 1% of the company's outstanding stock, or the average of the immediately past four weeks of trading volume.
  (a) II, IV (b) I, II, III (c) II, III (d) I, IV
The holding period for restricted stock is one year, fully-paid. During the second year, an investor must file a Form 144, which covers 90 days of sales, with the SEC no later than concurrently with the sale. The volume limitation for sales is the greater of 1% of the company's stock or the average of the past four weeks trading volume
25) Which of the following terms are associated with the purchase/redemption of open-end investment company shares?    
  (a) At the money (b) Current business day close (c) Forward pricing (d) 90-day backdating
Forward pricing is the SEC Rule that requires all transactions in open-end investment company shares to be based on the next calculation of the fund's Net Asset Value (NAV).
26) A customer places an order to buy 1,000 shares of XYZ stock immediately at $35/share and cancel whatever portion of the order cannot be filled at that price. The registered representative will submit the order as which of the following?    
  (a) GTC (b) FOK (c) IOC (d) AON
The order requires an Immediate or Cancel notation. The customer will accept a partial fill of the order, so it is not FOK (Fill or Kill). GTC stands for Good Till Cancelled, and AON orders (All or None), which must be filled in one transaction are typically GTC
  (a) As a method of reducing the amount of semi-annual interest payments on the company’s debt. (b) As a means of reducing the amount of the company’s leverage. (c) To improve cash flow (d) To increase the capitalization of the company. For which of the following would a corporation not use the process of refunding?
Explanation: The term "refunding" means replacing one debt with another.  It is very much like an individual refinancing a home mortgage; it replaces an older debt (with higher interest rates) with a new debt paying lower interest. The new bond issue is called a "refunding" bond.  It would not be used to increase the company's capitalization.
  (a) A copy of the statement will continue to be sent to the client. (b) With the approval of the supervising principal, the statement will only go to the advisory firm (c) The copy of the client’s quarterly statement which would normally have been sent to her will be retained by the compliance department. (d) If the client submits a written, notarized request to the broker-dealer, the quarterly statement that would normally have gone to her will be maintained locally in her file A customer whose account is being traded for her by an investment advisory firm has had all confirmations of trades sent to the firm.  She calls her RR and tells him that it is unnecessary for the broker-dealer to send her a copy of her quarterly statement of account, since a copy of the statement is already going to the investment advisor.  Which of the following is a true statement?
Explanation: The requirement for a quarterly statement to be sent to a customer cannot be abridged.  The broker-dealer will continue to send the client the quarterly statement; what she does with the document upon receipt is her choice.
  (a) It is a utility stock (b) The current yield on the stock has gone down (c) The stock is anti-cyclical (d) The current yield on the stock has gone up A registered representative has been following PDQ stock in the market over the past year.  He has noticed that the stock's market price has dropped over the past six months, but that the dividends paid on the stock have remained the same.  This would indicate that:
Explanation: Current yield compares the current price of acquiring the stock to the income from the stock, the dividends.  In this case, the income has stayed the same while the price to acquire the stock has dropped.  This means that the actual return on a dollar invested has gone up.
4) Which of the following actions might be taken by a corporation, which has a large number of convertible debentures outstanding, to encourage the holders of those bonds to exercise their conversion privilege?

I. If the bonds are callable, issue new bonds to call the old in a process called "refunding."
II. Call the outstanding bonds at a price below parity.
III. Increase dividends on the company's stock to an amount above interest payable on the bonds.
IV. Call the outstanding bonds at above the parity price.
  (a) I, III (b) IV (c) II, III (d) I, IV
When it is advantageous to the company to take actions that lead holders of convertible bonds to convert their debt to equity, the company may take actions that are considered "forced conversion." Choices II and III are the methods employed. Calling the bonds at a price below the total dollar amount the investor would receive if he/she exercises conversion and sells the stock is possible if the bond indenture gives the issuer that flexibility. In choice III, the company encourages investors to take advantage of greater income from stock—if they convert—than they're receiving from bond interest.

5) A registered representative has a customer with a large portfolio of corporate bonds. In the portfolio are a number of XYZ convertible debentures which convert into 50 shares of the common stock of the company. In the Wall Street Journal, the registered representative sees a notice that the XYZ convertibles are being called at par in three weeks. The company's stock is currently trading at $21/share. What should the registered representative do?    
  (a) Recommend that the customer sell the stock “short-exempt” and simultaneously convert the bonds. (b) Nothing. The call means that the bonds are being redeemed and the customer will receive par value. (c) Recommend that the customer sell the bonds at par now in case the company has a shortage of funds to make the planned call. (d) Recommend that the customer buy additional non-convertible bonds in the company prior to the call date.
The bonds are convertible into 50 shares of the company's common stock. This means that the conversion price is $20/share ($1,000 ÷ 50 shares = $20/share). The stock is trading at $21 so the investor will immediately sell the stock short-exempt—meaning, since he is simultaneously converting the bond, he doesn't have to wait for an uptick—and convert the bonds. The investor will realize a $50 per bond gain above the call at par.

  (a) Rehypothecated (b) Subject to a maintenance call (c) Properly margined according to Reg. “T.” (d) Restricted A customer's long margin account is as follows:
            CMV - $55,000             DR - $30,000             SMA - $5,000

After the customer withdraws the $5,000 SMA, this account is:
Explanation: CMV-DR = EQ.  With Reg. "T" at 50%, the EQ in the account should be $27,500.  The account equity is still above the SRO minimum maintenance level, but is below the Reg. "T" level. The account is considered "restricted" and is subject to the 50% retention rule.
  (a) III (b) III, IV (c) II (d) I, III, IV If a stock held by a customer in a margin account pays a cash dividend, which of the following statement(s) is/are true?
              I.      The customer may receive the dividend in cash            II.      The firm will require that the dividend be left in the account.          III.      The customer may apply the dividend against the debit balance.         IV.      If the dividend is left in the account and applied to the debit balance, the SMA will increase.      
Explanation: The customer has the option of taking the cash dividend or leaving it in the account to be applied to reduce the debit balance.  If it is applied against the debit balance, it will increase the SMA in the account on a dollar-for-dollar basis
8) Which of the following would not be considered a suitable investment recommendation for a retired person seeking consistent income and safety?    
  (a) GNMA Certificates (b) Money market mutual funds (c) Adjustment bonds (d) U.S. Treasury Bonds
Adjustment bonds are also known as income bonds, and only pay interest if the company earns a sufficient level of income. All the other choices are investments that would meet the investor's objectives
  (a) $10,000 (b) $18,000 (c) $6,000 (d) $13,000 A customer's margin account is as follows:
  • Long 500 shares PDQ @ 50
  • Short 200 shares FBN @ 30
  • Credit balance = $14,000
  • Debit balance = $15,000
What is the customers combined equity in her account?
Explanation: In this question the customer's full account information is given so we just follow both formulas for account equity and add the result.  Long account: Current market value -; debit = equity ($25,000-15,000 = $10,000).  Short account: Credit -; Market value short = equity ($14,000-6,000 = $8,000).  For the total combined equity, add the two ($10,000+8,000)=$18, 0000.
  (a) Has been the subject of high short interest (b) Is a penny stock (c) There has been considerable disintermediation in the stock (d) Has a low beta coefficient An investor has heard an analyst on a television program saying that a particular stock that had been steadily falling, "rose today on a technical rally." When she calls her registered representative for an explanation, he explains that the stock:
Explanation: When there is considerable interest, by investors, in selling a stock short; this is a near-term bullish indicator.  Whether the investors are selling from a long or short position, the price of the stock will drop.  That is, of course, exactly what the short-sellers want.  When the price goes down to a level that some of the short sellers begin to buy it to cover the short position, the stock begins to rise and other investors in a short position begin to buy to get out of the short stock position with a profit.
11) Which of the following statements would describe a UIT?

I. Under management according to a specific investment objectives
II. Non-redeemable investment units
III. Characterized by a non-managed portfolio
IV. Redeemable units of investment
  (a) I (b) III, IV (c) II, III (d) I, IV
The essential characteristics of a Unit Investment Trust (UIT) are that it does not manage a portfolio and issues are redeemable. The portfolio of investments, municipal bonds, for example is professionally chosen, but once selected the portfolio remains fixed. The UIT will redeem the investor's units upon request
12) Calculate an investment's expected return [E(Ri)] based on the following data:

    Risk-free rate of return (RF):          3%
    Market rate of return (RM):          15%
    Variance of RM2M):                  7
    Covariance of the market
    and the investment [Cov(RM,Ri)]: 11
  (a) 18.22% (b) 10.64% (c) 21.84% (d) 12.04%
Step 1: Calculate the stock's beta: 11 ÷ 7 = 1.57

Step 2: Incorporate beta into the capital asset pricing model:

ra = rf + ßa(rm -rf)
   = 0.03 + 1.57(0.15 - 0.03)
   = 0.2184 or 21.84%
13) Which of the following indexes is used in the computation of the beta coefficient on stocks?    
  (a) S&P (b) Russell 2000 (c) DJIA (d) Wilshire
 The beta coefficient is a measure of the volatility of a stock (or portfolio) as compared to the overall market. The S&P 500 is assigned a beta of 1. Any stock or mutual fund with a beta greater than 1 is more volatile than the index and generally considered higher risk than stocks with a lower (less than 1) beta
  (a) Low beta stocks (b) Utility stocks (c) Blue-chip stocks (d) High beta stocks In a bull market, if the customer wishes to take full advantage of the trend, which of the following would the registered representative recommend?
Explanation: Because of their greater volatility, the high beta stocks will respond to the bullish trend in a more dramatic way.  They will tend to grow faster than the overall market.  Blue-chips will, of course, grow but not proportionally as fast.  Utilities are defensive stocks and tend to be interest-rate sensitive.  Low beta stocks will not keep up with the overall market.
A mutual fund's prospectus describes the fund as a "regulated" investment company and states that its primary objective is to provide income to its shareholders through regular distributions from its balanced portfolio. Which of the following describes a "regulated" investment company?
I. The mutual fund must distribute at least 95% of interest income to qualify as a regulated investment company.
II. The fund may also be described as operating under the "pipeline" or "conduit" tax theory.
III. The fund must distribute at least 90% of its net investment income and capital gains to qualify as a regulated investment company.
IV. The mutual fund must only distribute 90% of its dividend income.
  (a) I, IV (b) I, II (c) II, IV (d) II, III
The term "regulated investment company" is synonymous with "pipeline" or "conduit" tax theory.  Such a fund must distribute at least 90% of its net investment income (dividends from stock + interest from bonds -; fund expenses) as dividends and at least 90% of its capital gains to avoid being taxed on this income at the fund level. All distributions are taxable to the shareholders

(a) 18.90 (b) 2.86 (c) 26.04 (d) 7.14
First, remember that OEX is the symbol for the S&P 100 index. The premium in an options contract is composed of both intrinsic value and time value. The intrinsic value of the Sept 510 call is 26.04 since the index closed at 536.04. In a call, subtract the strike price from the market price to find intrinsic value (536.04-510 = 26.04). Subtract the intrinsic value from the premium to find the time value (28.90-26.04 = 2.86).

  (a) three business days after the trade date (b) the fifth business date after the trade (c) the date set by the fund (d) two business days prior to the record date The ex-dividend date for mutual fund distributions is:
Unlike corporate dividends, in mutual funds, the fund itself—either the board of directors or the fund's principal underwriter will set the ex-dividend date.
  (a) has excess equity (b) is under margined (c) is in a position for a maintenance call (d) is restricted Use the following information about a customer's margin account to answer the question.
  • ABC stock - 200 shares. CMV $40/share
  • PDQ stock - 100 shares. CMV $30/share
  • LIB stock - 100 shares. CMV $50/ share
  • Debit balance -- $6,400
From the information above, this account:
This is, of course, a long margin account.  The formula for the account is: CMV-DR=EQ (16,000 CMV -; 6,400 DR = 9,600 EQ). To determine the Reg. "T" EQ requirement, multiply the CMV by 50% (16,000 ´ 50% = 8,000). The account actually has 9,600; therefore it has excess equity
  (a) Changes in the prime interest rate (b) Orders for durable goods (c) New housing starts (building permits) (d) The overall stock market represented by the S&P 500 index Which of the following is not considered to be a leading economic indicator?
The index of leading economic indicators includes those factors that tend to move ahead of the overall economy.  All of the choices above are included in that list except changes in the prime interest rate, which is considered a lagging indicator
  (a) A deposit of $2,500 will be required (b) Sales proceeds of $5,000 credited to her account (c) She will be required to meet a maintenance call for $5,000 (d) Sales proceeds of $15,000 credited to her account A registered representative has a client, Sally, whose margin account has become restricted.  Sally makes the following trades in the account on the same day: Sell 500 shares LIB @ 30 and buy 200 shares PDQ @ 25.  What will be the result of these transactions?
Explanation: When a client buys and sells in a restricted margin account, it is a same-day substitution.  In a restricted account, if the transactions result in a net sale, the 50% retention rule requires 50% of any net sale to be retained by the broker-dealer.  In this case, the net sale is $10,000 ($15,000 -; $5,000 = $10,000), and 50% of the net sale is $5,000 ($10,000 × 50% = $5,000).
21) Which TWO of the following are characteristics of an aggressive portfolio management policy?

I.      Focuses primarily on capital preservation.
II.      Is suited for investors who want their portfolios to grow over time.
III.      Considers dividend and interest income as important components alongside capital gains
IV.      Often utilized by younger investors who have enough earned income per year to handle current expenses.
  (a) II and III (b) II and IV (c) I and II (d) I and IV
I and III are not characteristics of an aggressive portfolio management policy. Capital preservation describes a defensive policy; investing for both income and gains describes a balanced policy
  (a) the debt ratio (b) the acid test (c) the company’s EPS (d) the company’s P/E ratio An analyst, in determining the capitalization of a corporation, would most likely consider:
Explanation: A corporation's capitalization is a description of how the company has raised operating capital.   Since companies issue both equity and debt instruments in this effort the debt ratio compares the amount of debt to equity.
23) In a briefing by the firm's technical analysis section, an RR hears that XYZ stock has formed a saucer. The RR should take this to mean which of the following?    
  (a) The stock has been moving down but has formed a bottom and is now moving up. (b) XYZ is being consolidating after long-term bullish movement and is moving in a flat pattern. (c) XYZ has been in an uptrend, has consolidated and is reversing. (d) The stock has shown bullish tendencies, but is now in a bearish cycle.
Picture a saucer: The stock has been moving downward, has formed a bottom and is beginning to move upward. The trendlines are exactly like a saucer is shaped.

(a) geography (b) management tenure (c) asset class (d) risk profile
You would consider a company's management when you are reviewing particular securities, not when you are developing an overall asset allocation
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