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Questions and Answers
What is the maximum potential gain on a customer who writes an MMM January 70 put at 6?
What is the maximum potential gain on a customer who writes an MMM January 70 put at 6?
600
What is the maximum gain potential for a customer who is long 1 October 75 put at 2?
What is the maximum gain potential for a customer who is long 1 October 75 put at 2?
7300
Large time deposits of more than $100,000 are part of which segment of the money supply?
Large time deposits of more than $100,000 are part of which segment of the money supply?
M3
By purchasing shares of stock in a company, investors can benefit from which of the following? (Select all that apply)
By purchasing shares of stock in a company, investors can benefit from which of the following? (Select all that apply)
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What is an offering in which stockholders in a corporation sell their own shares to the public for the first time called?
What is an offering in which stockholders in a corporation sell their own shares to the public for the first time called?
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Which of the following is an example of an unsecured debt security? (Select all that apply)
Which of the following is an example of an unsecured debt security? (Select all that apply)
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What are mutual funds that market directly to the public, using no underwriter and charging no sales charge called?
What are mutual funds that market directly to the public, using no underwriter and charging no sales charge called?
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During the cooling-off period, underwriters of new securities may: (Select all that apply)
During the cooling-off period, underwriters of new securities may: (Select all that apply)
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What is the USA PATRIOT Act's required Customer Identification Program chiefly designed to prevent? (Select all that apply)
What is the USA PATRIOT Act's required Customer Identification Program chiefly designed to prevent? (Select all that apply)
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Who must undergo the firm element of a broker-dealer's continuing education requirement?
Who must undergo the firm element of a broker-dealer's continuing education requirement?
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What happens to the writer of an August 15 call written at 4 if the call expires without being exercised?
What happens to the writer of an August 15 call written at 4 if the call expires without being exercised?
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What is the one thing a mutual fund must NOT offer to investors?
What is the one thing a mutual fund must NOT offer to investors?
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In a Limited Partnership (LP), the partnership entity is responsible for paying taxes on gains.
In a Limited Partnership (LP), the partnership entity is responsible for paying taxes on gains.
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What additional dividend will participating shareholders receive if the preferred, participating to 6% shares pay the full participating dividend?
What additional dividend will participating shareholders receive if the preferred, participating to 6% shares pay the full participating dividend?
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In order to borrow money for a security purchase from a broker-dealer, the customer must pay interest based on what rate?
In order to borrow money for a security purchase from a broker-dealer, the customer must pay interest based on what rate?
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Which critical date in the dividend disbursement process is determined by either FINRA or the exchange?
Which critical date in the dividend disbursement process is determined by either FINRA or the exchange?
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If an investor owns 500 shares of stock valued at $20 per share and then experiences a split, ending up with 400 shares, what is the new price per share?
If an investor owns 500 shares of stock valued at $20 per share and then experiences a split, ending up with 400 shares, what is the new price per share?
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On what date do listed options typically expire?
On what date do listed options typically expire?
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What type of bond has successive maturities set from 2020 through 2030?
What type of bond has successive maturities set from 2020 through 2030?
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If an investor is given fraudulent information about a security that led to a loss, how long do they have to bring action?
If an investor is given fraudulent information about a security that led to a loss, how long do they have to bring action?
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After a branch office manager approves an options account for trading, who must ultimately approve it?
After a branch office manager approves an options account for trading, who must ultimately approve it?
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A member firm may vote shares on minor matters if the proxy statements have not been returned.
A member firm may vote shares on minor matters if the proxy statements have not been returned.
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If an investor is notified of a stock split from 400 to 600 shares, how must the split have occurred?
If an investor is notified of a stock split from 400 to 600 shares, how must the split have occurred?
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Which organization does the MSRB rely on for enforcement of its rules?
Which organization does the MSRB rely on for enforcement of its rules?
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Under what circumstances could a broker-dealer share in a financial loss with a customer?
Under what circumstances could a broker-dealer share in a financial loss with a customer?
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Under the UTMA, what can a custodian NOT do?
Under the UTMA, what can a custodian NOT do?
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Which actions are required by the Telephone Consumer Protection Act of 1991 when an individual expresses disinterest in future investment calls? (Select all that apply)
Which actions are required by the Telephone Consumer Protection Act of 1991 when an individual expresses disinterest in future investment calls? (Select all that apply)
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Regarding mutual fund sales charges, which statements are TRUE? (Select all that apply)
Regarding mutual fund sales charges, which statements are TRUE? (Select all that apply)
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What type of bonds would an investor likely buy if they anticipate falling interest rates?
What type of bonds would an investor likely buy if they anticipate falling interest rates?
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What describes the results of a 1 for 2 reverse stock split?
What describes the results of a 1 for 2 reverse stock split?
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Notice is NOT required for associated persons involved in extensive fundraising for a charitable institution.
Notice is NOT required for associated persons involved in extensive fundraising for a charitable institution.
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Which of the following stocks are classified as penny stocks? (Select all that apply)
Which of the following stocks are classified as penny stocks? (Select all that apply)
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When investing in foreign securities, what risk must investors be aware of?
When investing in foreign securities, what risk must investors be aware of?
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What is required before a registered representative can place advertisements in a youth athletic league's sponsorship booklet?
What is required before a registered representative can place advertisements in a youth athletic league's sponsorship booklet?
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On margin, which rate is a customer expected to pay for borrowing funds?
On margin, which rate is a customer expected to pay for borrowing funds?
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What type of offering might a company employ to raise capital without going through the registration process mandated by the Securities Act of 1933?
What type of offering might a company employ to raise capital without going through the registration process mandated by the Securities Act of 1933?
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In a corporate bankruptcy liquidation, which is paid first and which is paid last? (Select all that apply)
In a corporate bankruptcy liquidation, which is paid first and which is paid last? (Select all that apply)
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What is allowed for a registered representative who has remodeled their home and wishes to work remotely?
What is allowed for a registered representative who has remodeled their home and wishes to work remotely?
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Who guarantees the performance of listed options contracts?
Who guarantees the performance of listed options contracts?
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Fingerprint cards are required by the SEC to be filed with whom?
Fingerprint cards are required by the SEC to be filed with whom?
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Voting rights are a privilege afforded to which type of shareholders?
Voting rights are a privilege afforded to which type of shareholders?
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What are allowable deductions to compensate for decreasing natural resources in an oil and gas DPP called?
What are allowable deductions to compensate for decreasing natural resources in an oil and gas DPP called?
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Which characteristics are common to penny stocks? (Select all that apply)
Which characteristics are common to penny stocks? (Select all that apply)
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Which records must be kept for the life of a broker-dealer firm?
Which records must be kept for the life of a broker-dealer firm?
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What is TRUE regarding U.S. Treasury-issued securities?
What is TRUE regarding U.S. Treasury-issued securities?
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If an investor owns MMS call options, what is this investor's outlook?
If an investor owns MMS call options, what is this investor's outlook?
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Accusations of FINRA Conduct Rule violations will be handled under what system?
Accusations of FINRA Conduct Rule violations will be handled under what system?
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Who must a party wishing to solicit proxy authority register with?
Who must a party wishing to solicit proxy authority register with?
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What is the term for selling a stock before actually paying for the purchase?
What is the term for selling a stock before actually paying for the purchase?
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Who is responsible for implementing monetary policy and maintaining the stability of the U.S. financial system?
Who is responsible for implementing monetary policy and maintaining the stability of the U.S. financial system?
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How are securities issued by the U.S. federal government classified? (Select all that apply)
How are securities issued by the U.S. federal government classified? (Select all that apply)
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In which direct participation programs (DPP) are deductions for depletion most likely to apply?
In which direct participation programs (DPP) are deductions for depletion most likely to apply?
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When should your firm provide a privacy notice to customers?
When should your firm provide a privacy notice to customers?
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Which items must be included on the cover page or beginning of a summary prospectus of a mutual fund? (Select all that apply)
Which items must be included on the cover page or beginning of a summary prospectus of a mutual fund? (Select all that apply)
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Class C mutual fund shares are also known as what?
Class C mutual fund shares are also known as what?
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What is included in secured corporate debt?
What is included in secured corporate debt?
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Of the following risks, which is most closely associated with reinvestment risk? (Select all that apply)
Of the following risks, which is most closely associated with reinvestment risk? (Select all that apply)
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Which retirement plan does NOT require minimum distributions once the participant reaches age 70½?
Which retirement plan does NOT require minimum distributions once the participant reaches age 70½?
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General partners (GPs) in a limited partnership should participate in day-to-day management.
General partners (GPs) in a limited partnership should participate in day-to-day management.
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How long does an investor have to bring action if they discover they were given fraudulent information on a security two years and nine months ago?
How long does an investor have to bring action if they discover they were given fraudulent information on a security two years and nine months ago?
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What do member firm communications need to comply with according to FINRA standards? (Select all that apply)
What do member firm communications need to comply with according to FINRA standards? (Select all that apply)
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Which of the following would be considered earned income?
Which of the following would be considered earned income?
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What does a broker-dealer do to finance a margin loan when a client purchases stock?
What does a broker-dealer do to finance a margin loan when a client purchases stock?
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How is Mr. Smith classified in relation to the trade that coincides with Mr. Jones who has insider information?
How is Mr. Smith classified in relation to the trade that coincides with Mr. Jones who has insider information?
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What must a member firm report if an associated person is suspended by the SEC?
What must a member firm report if an associated person is suspended by the SEC?
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If an investor requests a preliminary prospectus for a new issue, what is true about this document?
If an investor requests a preliminary prospectus for a new issue, what is true about this document?
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Under the Investment Company Act of 1940, which of the following is NOT considered an investment company? (Select all that apply)
Under the Investment Company Act of 1940, which of the following is NOT considered an investment company? (Select all that apply)
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What is true during the 20-day cooling-off period? (Select all that apply)
What is true during the 20-day cooling-off period? (Select all that apply)
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What feature does a bond having a call option have?
What feature does a bond having a call option have?
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Which strategy is considered most risky in a strong bull market?
Which strategy is considered most risky in a strong bull market?
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Which item cannot be traded on an exchange?
Which item cannot be traded on an exchange?
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What is it called when a corporation divests itself of all shares of another company it owns?
What is it called when a corporation divests itself of all shares of another company it owns?
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How is interest paid on a 7% corporate bond to the investor?
How is interest paid on a 7% corporate bond to the investor?
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Private placements are primarily sold to whom?
Private placements are primarily sold to whom?
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Which of the following transactions constitute a private securities transaction, or 'selling away'? (Select all that apply)
Which of the following transactions constitute a private securities transaction, or 'selling away'? (Select all that apply)
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Study Notes
Options and Derivatives
- Maximum potential gain on writing an MMM January 70 put at 6 is $600.
- Long 1 October 75 put at 2 has a maximum gain potential of $7,300.
- A written August 15 call at 4 that expires unexercised allows the writer to retain $400.
Money Supply and Securities
- Large time deposits greater than $100,000 fall under M3 category in the money supply.
- Securities issued by the U.S. federal government are classified as receipts, STRIPS, and bills.
Mutual Funds
- No-load funds are mutual funds marketed directly to the public with no sales charge.
- Class C mutual fund shares are also recognized as level load shares.
- Mutual fund sales charges are not an expense to the fund but to the investor and compensate underwriters.
Corporate Actions and Shareholders
- A secondary offering involves stockholders selling their own shares to the public.
- Voting rights are typically granted to common shareholders only.
- Spin-off refers to a corporation divesting all shares of another company it owns.
Regulatory and Compliance
- Customer Identification Programs, per the USA PATRIOT Act, mainly prevent the funding of terrorist activities and money laundering.
- Registered representatives require pre-approval for advertisements, including sponsorships.
- All communications from member firms must align with FINRA standards.
Debt Instruments
- Examples of unsecured debt securities include debentures and income bonds.
- Secured corporate debt includes mortgage debt.
- A bond with a call feature can be redeemed by the issuer before maturity.
Trading and Market Activities
- Listed options expire on the third Friday of the expiration month.
- Solicitations during the cooling-off period of securities may not be made, but indications of interest can be accepted.
Investor Rights and Actions
- An investor who bought securities based on fraudulent information has three months to bring a complaint.
- A registered representative is considered a contemporaneous trader if trading at the same time as someone with insider information.
Tax and Earnings Considerations
- Depletion allowances are tax deductions for compensating natural resource depletion.
- A Roth IRA does not require minimum distributions after age 70½.
Investment Risks
- Reinvestment risk is mostly associated with call risk.
- An investor should understand currency risk when investing in foreign securities.
Other Key Concepts
- Freeriding occurs when a customer sells stock before paying for the purchase.
- Under the UTMA, custodians cannot engage in selling short or writing uncovered call options.
- Interest on a 7% corporate bond is received as two semiannual payments of $35 each.
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Description
Test your knowledge on key finance concepts, including options, derivatives, money supply, and mutual funds. This quiz covers essential terms and practices that every finance student should know. Get ready to dive deep into the intricacies of corporate actions and securities.
