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Questions and Answers
What is it called when an investor tells his RR to purchase 50m EGG 11.7% debenture bonds, which are purchased for 113 and valued at 103 a year before maturity?
What is it called when an investor tells his RR to purchase 50m EGG 11.7% debenture bonds, which are purchased for 113 and valued at 103 a year before maturity?
Amortization
In oil and gas limited partnerships, is the risk greater in developmental or exploratory programs?
In oil and gas limited partnerships, is the risk greater in developmental or exploratory programs?
Exploratory
What is the best way to measure the Gross National Product (GNP)?
What is the best way to measure the Gross National Product (GNP)?
Constant dollars
What is the broker's role in the term 'broker/dealer'?
What is the broker's role in the term 'broker/dealer'?
What is the maximum federal tax rate for corporations on their dividends and other income?
What is the maximum federal tax rate for corporations on their dividends and other income?
What is the maximum federal tax rate for individuals on their dividends and other income?
What is the maximum federal tax rate for individuals on their dividends and other income?
What type of securities are exempt from registration under the Securities Act of 1933?
What type of securities are exempt from registration under the Securities Act of 1933?
Under federal guidelines, how is the premium received by the writer of a put treated when the put is assigned?
Under federal guidelines, how is the premium received by the writer of a put treated when the put is assigned?
How much income must a REIT generate from real estate properties?
How much income must a REIT generate from real estate properties?
How much must a REIT pass-through of its profits to investors?
How much must a REIT pass-through of its profits to investors?
What option position would a portfolio manager of a pension fund make if they desire income but want to protect the portfolio?
What option position would a portfolio manager of a pension fund make if they desire income but want to protect the portfolio?
How many days does an investor have to pay when they buy a corporate bond?
How many days does an investor have to pay when they buy a corporate bond?
What are the rating agencies for short-term, long-term, and municipal debt securities?
What are the rating agencies for short-term, long-term, and municipal debt securities?
What does Best's Rating service rate?
What does Best's Rating service rate?
How are CDs issued?
How are CDs issued?
Where are CDs shown and for how long?
Where are CDs shown and for how long?
How are CDs quoted?
How are CDs quoted?
Who does not issue Eurodollar deposits?
Who does not issue Eurodollar deposits?
What kind of taxes is the interest of corporate bonds subject to?
What kind of taxes is the interest of corporate bonds subject to?
If a zero-coupon bond is held for one year and sold above its original value, what will the investor have?
If a zero-coupon bond is held for one year and sold above its original value, what will the investor have?
If a zero-coupon bondholder holds it until maturity, what will they have?
If a zero-coupon bondholder holds it until maturity, what will they have?
What type of muni note does not get rated by MIG because they are backed by a government bond?
What type of muni note does not get rated by MIG because they are backed by a government bond?
What does a bond indenture NOT include?
What does a bond indenture NOT include?
What is required before a revenue bond can be issued?
What is required before a revenue bond can be issued?
What must a muni bond being issued obtain from a bond counsel?
What must a muni bond being issued obtain from a bond counsel?
What three things does the bond counsel help do while making its opinion?
What three things does the bond counsel help do while making its opinion?
What are the three major bond rating organizations?
What are the three major bond rating organizations?
What does a broker's broker NEVER do?
What does a broker's broker NEVER do?
Who determines the tax-exempt status of interest on muni bonds through the tax code?
Who determines the tax-exempt status of interest on muni bonds through the tax code?
Who assesses the tax-exempt status of the interest on the bond for the muni by checking local and state laws?
Who assesses the tax-exempt status of the interest on the bond for the muni by checking local and state laws?
Who enforces MSRB rules?
Who enforces MSRB rules?
What does MSRB Rule G-8 require when opening new accounts?
What does MSRB Rule G-8 require when opening new accounts?
What does MSRB Rule G-19 suitability require?
What does MSRB Rule G-19 suitability require?
What are the six exceptions to the 10% penalty rule?
What are the six exceptions to the 10% penalty rule?
When does a person have to start taking withdrawals from a qualified retirement plan?
When does a person have to start taking withdrawals from a qualified retirement plan?
Who does a defined benefit plan benefit?
Who does a defined benefit plan benefit?
What method of payment is the least suggestive of money laundering?
What method of payment is the least suggestive of money laundering?
How many shares can be transmitted over Super DOT?
How many shares can be transmitted over Super DOT?
What is the only thing that can change hands in an index option?
What is the only thing that can change hands in an index option?
What type of security requires the investor to calculate the alternative minimum tax in addition to regular tax?
What type of security requires the investor to calculate the alternative minimum tax in addition to regular tax?
What bodies have jurisdiction over the areas covered by the Securities Exchange Act of 1934?
What bodies have jurisdiction over the areas covered by the Securities Exchange Act of 1934?
A customer opens an options account with your firm. Under FINRA rules, who has to sign the new account form?
A customer opens an options account with your firm. Under FINRA rules, who has to sign the new account form?
What value of the underlying stock determines whether the option has any real value?
What value of the underlying stock determines whether the option has any real value?
An option that is in the money is said to have what?
An option that is in the money is said to have what?
Who has intrinsic value: the buyer, the writer, or the option?
Who has intrinsic value: the buyer, the writer, or the option?
A call option is IN THE MONEY when the market price is _________ the strike price.
A call option is IN THE MONEY when the market price is _________ the strike price.
A put option is IN THE MONEY when the market price is ________ the strike price.
A put option is IN THE MONEY when the market price is ________ the strike price.
What is the most important factor when determining the premium for an option?
What is the most important factor when determining the premium for an option?
A closing transaction of an option can be accomplished in what three ways?
A closing transaction of an option can be accomplished in what three ways?
When do stock, index, and interest rate options expire?
When do stock, index, and interest rate options expire?
When do foreign currency options expire?
When do foreign currency options expire?
On a spread option position, what must be different?
On a spread option position, what must be different?
What does a vertical/price spread have?
What does a vertical/price spread have?
What does a horizontal/calendar spread have?
What does a horizontal/calendar spread have?
What does a diagonal spread have?
What does a diagonal spread have?
What are two ways investors incorporate option positions to hedge or enhance their stock position?
What are two ways investors incorporate option positions to hedge or enhance their stock position?
When investors buy options to protect their positions, they are considered to be what?
When investors buy options to protect their positions, they are considered to be what?
When is an investor considered to have a covered call?
When is an investor considered to have a covered call?
When is an investor considered to have a covered put?
When is an investor considered to have a covered put?
In an even stock split, what goes up?
In an even stock split, what goes up?
In an odd stock split, what goes up?
In an odd stock split, what goes up?
In an even and odd stock split, what goes down?
In an even and odd stock split, what goes down?
In a reverse even stock split, what goes down?
In a reverse even stock split, what goes down?
In a reverse odd stock split, what goes down?
In a reverse odd stock split, what goes down?
In a reverse even and odd stock split, what goes up?
In a reverse even and odd stock split, what goes up?
What can options contracts never be adjusted for?
What can options contracts never be adjusted for?
When opening a new options account, who is responsible for determining the suitability of a client based on financial objectives?
When opening a new options account, who is responsible for determining the suitability of a client based on financial objectives?
When does the OCC disclosure document have to be given to a client?
When does the OCC disclosure document have to be given to a client?
A customer can trade before they sign the OPTIONS AGREEMENT but not before they have seen the what?
A customer can trade before they sign the OPTIONS AGREEMENT but not before they have seen the what?
Once the options agreement is sent to the customer, how many days do they have to sign in?
Once the options agreement is sent to the customer, how many days do they have to sign in?
How much of a customer's investment portfolio should be committed to options trading?
How much of a customer's investment portfolio should be committed to options trading?
When an options contract is first written, who clears all premiums?
When an options contract is first written, who clears all premiums?
When do all options trades settle?
When do all options trades settle?
Exercising an option before the ex-dividend date entitles who to the dividend?
Exercising an option before the ex-dividend date entitles who to the dividend?
What happens to any outstanding option contracts that are in the money by $0.01 or more on the expiration date?
What happens to any outstanding option contracts that are in the money by $0.01 or more on the expiration date?
When do equity options that are exercised settle?
When do equity options that are exercised settle?
When do index and interest rate options that are exercised settle?
When do index and interest rate options that are exercised settle?
In regards to taxation, what results from the trading of options when the option expires unexercised?
In regards to taxation, what results from the trading of options when the option expires unexercised?
When asked for proceeds or cost basis of an option, what should you find?
When asked for proceeds or cost basis of an option, what should you find?
Where do most index options trade?
Where do most index options trade?
In trading index options, who pays the seller the premium?
In trading index options, who pays the seller the premium?
In exercising index options, who pays the buyer of the options?
In exercising index options, who pays the buyer of the options?
What price can investors exercise an index option at?
What price can investors exercise an index option at?
Index options cannot be exercised before what?
Index options cannot be exercised before what?
If an investor wants to act on the price of an index option in the middle of the day, what is the only action that the investor can take?
If an investor wants to act on the price of an index option in the middle of the day, what is the only action that the investor can take?
Index options have a multiplier of what?
Index options have a multiplier of what?
What represents the best hedge against systematic/market risk?
What represents the best hedge against systematic/market risk?
When do VIX options expire?
When do VIX options expire?
What do foreign currency options trade in?
What do foreign currency options trade in?
How can foreign currency options be exercised?
How can foreign currency options be exercised?
How can a businessperson protect a payment if being paid in a particular currency in 30-60 days?
How can a businessperson protect a payment if being paid in a particular currency in 30-60 days?
How can a businessperson protect a payment if being paid in US dollars in 30-60 days?
How can a businessperson protect a payment if being paid in US dollars in 30-60 days?
What three things cause the devaluing of the US dollar?
What three things cause the devaluing of the US dollar?
When the US dollar loses value, what happens to exports?
When the US dollar loses value, what happens to exports?
If the US dollar is DEVALUED, what happens to bonds, yields, and US goods?
If the US dollar is DEVALUED, what happens to bonds, yields, and US goods?
If the US dollar is REVALUED, what happens to bonds, yields, and US goods?
If the US dollar is REVALUED, what happens to bonds, yields, and US goods?
Mutual fund shares are redeemed at the net asset value less a what?
Mutual fund shares are redeemed at the net asset value less a what?
Study Notes
Bonds and Securities
- Amortization occurs when a bond is purchased above par and later valued lower as it approaches maturity.
- Exploratory programs in oil and gas partnerships present greater risk than developmental programs.
- Government agency issues are exempt from registration under the Securities Act of 1933.
Financial Measurements and Taxation
- Gross National Product (GNP) is best measured in constant dollars to account for inflation.
- Maximum federal tax rate for corporations is 35% on dividends and other income, while individuals face a 20% maximum rate.
Real Estate Investment Trusts (REITs)
- A REIT must generate at least 75% of its income from real estate properties.
- To maintain its status, a REIT must pass through 90% of its profits to investors.
Account Management and Regulation
- A registered representative should request an extension for stock payment by the fifth business day.
- FINRA, the Comptroller of the Currency, and the Federal Reserve Board enforce MSRB rules.
Options Trading
- Covered calls are employed to generate income while protecting stock portfolios.
- A registered representative is responsible for assessing the suitability of a client before options trading.
Taxation of Investments
- Bondholders face federal and state income taxes on corporate bond interest.
- Zero-coupon bonds generate ordinary income and capital gains if sold above original value before maturity.
Bond and Municipal Ratings
- The main bond rating agencies include S&P, Moody's, and Fitch's.
- Fee studies and engineering reports are required before issuing revenue bonds, stressing the importance of due diligence.
Options Positioning and Hedging
- Options used for hedging involve buying for protection or writing for income.
- Index options serve as a hedge against systematic market risk, with a multiplier of 100.
Market Dynamics
- In an even stock split, the number of contracts increases while the strike price and premium decrease.
- Devaluation of the US dollar leads to competitive exports and increased yields, whereas revaluation has the opposite effect.
Miscellaneous
- The OCC clears all premiums from options contracts when first written.
- VIX options expire on the Wednesday 30 days before the third Friday of the next calendar month, impacting market speculation.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge on key concepts from Series 7 exam material through these flashcards. Covering topics such as bond valuation and partnership risks, this quiz is designed to enhance your understanding and preparation for licensing tests in finance. Challenge yourself and track your progress with these interactive questions.
