PRACTICE TEST 3

A 28 year, 12% bond is callable in 10 years at 108, 14 years at 105, and 18 years at 103. How many years of call protection does this bond have?

10 years

Which of the following statements related to preferred stock are true?

• I. The typical par value is $100

• II. The typical par value is $1,000

• III. It is suitable for investors seeking capital appreciation

• IV. It is suitable for investors seeking income

I and IV

Which of the following may the firm choose on behalf of a customer without needing POA?

Price and time of trade

An investor establishes a margin account at their broker-dealer. What are the minimum maintenance margin requirements they must abide by?

25% equity for long accounts; 30% equity for short accounts

A cash account requires customers to do which of the following?

Pay fully for any securities purchases

A 16 year, 3.20% bond is quoted at a 15 point premium. What is the correct order of yields, from highest to lowest?

Stated, current, yield to maturity, yield to call

A best efforts commitment underwriting would best be described by which of the following choices?

The issuer keeps unsold securities

If insider information is passed between parties and a trade occurs, who is subject to criminal prosecution?

Both the tipper and tippee

Which of the following is an exempt issue?

Municiple/government bond

All of the following terms apply to a real estate limited partnership, EXCEPT:

Depletion

A hedge fund is considering a significant investment in a publicly traded company in hopes of a hostile takeover. Which of the following actions will they likely pursue?

Extension of a tender offer

From lowest to highest, what are the order of the yields for a bond purchased at 102?

YTC, YTM, current, nominal

Karter withdraws $14,000 from their traditional IRA at age 32 to pay for expenses related to their disability. What is the tax consequence?

Ordinary income taxes

The maximum maturity for a banker's acceptance/commercial paper is:

270 days

What is the maximum contribution to a Coverdell ESA?

$2,000 per person, per year

An investor is provided with an offering memorandum while purchasing a security. What type of offering is this document most likely associated with?

Regulation D offerings

All of the following terms are synonymous, EXCEPT:

Yield to maturity

A registered representative recommends a purchase of 750 shares of ABC stock at $100 to a customer. Hoping to make the customer happy, the representative offers to personally repurchase the shares if they drop below $90. This offer is:

Prohibited due to the performance guarantee

Which of the following representatives is NOT considered a Municipal Finance Professional?

An RR soliciting business from retail clients seeking municipal securities

An investor annuitizes their variable annuity and opts for a life with 5 year period certain. What best describes the length of time payments will be received?

Payments made until annuitant dies or for a 5 year period, whichever is longer

A representative submits a letter of resignation to their employing broker-dealer in order to pursue a job in another industry. Which of the following statements is false?

The employee's records must be kept on file for 6 years after their resignation