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NEW QUESTION 227
Which of the following clients could not open a margin account?
- A. a corporation
- B. a custodian under UGMA
- C. an uncovered option writer
- D. a husband and wife in a joint account
Answer: B
Explanation:
a custodian under UGMA. The Uniform Gifts to Minors Act requires securities registration in
the name of the custodian for the benefit of the minor. A margin account does not qualify because such an
account has all securities registered in street name.
NEW QUESTION 228
Which of the following best describes phantom income?
- A. income reported but not received
- B. income from deductions and tax credits
- C. the non-taxable portion of a distribution
- D. income received but not reported
Answer: A
Explanation:
income reported but not received. Reportable income that is not distributable includes loan
forgiveness.
NEW QUESTION 229
Municipal bond brokers generally conduct the following:
- A. trade for their own account
- B. both A and B
- C. trade for non-bank dealers
- D. trade for dealer banks
Answer: B
Explanation:
both A and B. Brokers generally operate as agents attempting to locate buyers or sellers for
bond dealers. They do not trade for their own accounts or deal directly with individual investors.
NEW QUESTION 230
Which of the information below does not appear in the official notice of sale?
- A. the names of underwriting syndicate members
- B. the amount of required good faith check
- C. the type of bond
- D. the method and place of settlement
Answer: A
Explanation:
the names of the underwriting syndicate members. At the time the notice of sale is published,
the syndicate has generally not been formed. All the other information is required.
NEW QUESTION 231
A revenue bond is issued by a state agency. The state legislature is granted authority to apportion money
to support the debt services if necessary, but is not legally obligated to do so. What type of bond is this?
- A. limited tax
- B. moral obligation
- C. Series 8
- D. double-barreled
Answer: B
Explanation:
moral obligation. The lack of a legally binding obligation removes the issue from the general
obligation category. Although defaults are possible, it is usually held that no state legislature would allow
a moral obligation issue to default.
NEW QUESTION 232
In the distribution of a new issue, a dealer acting as an underwriter is said to have a:
- A. firm market
- B. divided account
- C. free ride
- D. firm commitment
Answer: D
Explanation:
firm commitment. The term underwriting means a guarantee to the issuing corporation. This
is a firm commitment, unlike a best efforts offering where there is no guarantee.
NEW QUESTION 233
Bubba buys a municipal bond at a discount and holds it to maturity. Which of the following is true?
- A. the capital gain is tax exempt, but the interest is taxable as ordinary income
- B. interest is tax exempt, but the capital gain is taxable
- C. interest is taxable as ordinary income
- D. the capital gain is tax exempt
Answer: B
Explanation:
interest is tax exempt, but the capital gain is taxable. This happens because Bubba
purchased the bond in the secondary market with a different price than the original issue face amount.
NEW QUESTION 234
Which of the following have a stated interest rate on the face of the certificates?
- A. treasury bonds
- B. treasury bills
- C. both B and C
- D. treasury notes
Answer: C
Explanation:
both B and C. Treasury notes and treasury bonds have stated interest rates. Treasury bills
are always sold at a discount to the face amount payable at maturity.
NEW QUESTION 235
Regulation T is set at 50%. Bubba's account contains long positions in the following securities with the
prices listed
1 00 ABC $30
2 00 XYZ $70
2 00 QBB $40
2 00 KKK $25
Total market value = $30,000
Debit balance in the account = $12,000
Net equity balance of the account = $18,000
If Bubba wants to buy 100 shares of DUM at $30 per share, how much additional money must be
deposited?
- A. $0
- B. $2,000
- C. $3,000
- D. $1,500
Answer: A
Explanation:
$0. The cost of Bubba's purchase is $3,000 (100 x $30). But Reg T only requires 50% in
Bubba's account and he has that.
NEW QUESTION 236
Under what circumstances may a registered investment company change its investment objective?
- A. after SEC approval
- B. after approval by a majority vote of the shareholders
- C. after it obtains a new charter from the state secretary
- D. after providing notice that is recorded in the Federal Register
Answer: B
Explanation:
after approval by a majority vote of the shareholders. All vital interests of the shareholders
are subject to their majority vote.
NEW QUESTION 237
Which of the following pairs of corporation characteristics are easiest for a partnership to avoid?
- A. continuity of life of the business and transferability of assets
- B. two or more associates and free transferability of assets
- C. business objective and centralized management
- D. continuity of life of the business and limited liability
Answer: A
Explanation:
continuity of life of the business and transferability of assets. Partnerships may seek to avoid
continuance of the business life and asset transfer. The other choices are too important for partnerships
to sacrifice.
NEW QUESTION 238
Which of the following registered investment companies normally sells with an appropriate commission
added to the contract price?
- A. a unit investment trust
- B. an open-end investment company
- C. a closed-end investment company
- D. a face-amount certificate company
Answer: C
Explanation:
a closed-end investment company. An open-end investment company may have a sales
charge but not a commission.
NEW QUESTION 239
Which of the following stock exchanges is not registered with the SEC?
- A. Chicago Stock Exchange
- B. Pacific Stock Exchange
- C. all are registered
- D. Boston Stock Exchange
Answer: C
Explanation:
all are registered. All are registered with the SEC.
NEW QUESTION 240
Which of the following securities is traded only in the over-the-counter market?
- A. open-end investment companies
- B. corporate bonds
- C. preferred stocks
- D. closed-end investment companies
Answer: A
Explanation:
open-end investment companies. Open-end mutual funds are a continuous offering of new
securities that are not traded on an exchange. They trade only in the over-the-counter market. The other
choices may trade over-the-counter or on exchanges.
NEW QUESTION 241
An advertisement for a CMO security by a member of FINRA should disclose which of the following?
- A. the exact yield investor will earn
- B. that the yield may be greater than the stated percentage but never less
- C. that the stated yield is an estimate that may vary passed upon prepayments and market factors
- D. the yield based upon the prevailing discount rate
Answer: C
Explanation:
that the stated yield is an estimate that may vary passed upon prepayments and market
factors. The only guarantee is that nothing is guaranteed, especially the yield.
NEW QUESTION 242
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