Equities
Which Statement is True regarding preferred stock payments?
A. Preferred dividends are usually higher than those paid to common
B. Preferred dividends tend to grow over time
C. Preferred dividends are paid quarterly
D. Preferred interest is paid semi-annually
What is A
Preferred dividends are fixed and generally higher than those paid to common stock holder. Preferred dividends (not interest) are, in most cases, paid semi-annually, as compared to common stock dividends that are paid quarterly.
Which of these is a municipality?
A. A broker-dealer
B. A bank
C. The Federal Reserve
D. A county Government
What is D
Municipal bonds are issued by "municipalities" The term excludes the federal governments, its agencies, private entities and foreign entities.
All of the following are terms that apply to the purchase of an existing closed-end funds EXCEPT?
A. NAV
B. POP
C. Discount
D. Premium
What is B
There is no POP (public offering price) associated with closed-end funds. These funds trade at a discount or premium to NAV, per supply and demand.
Which of the following types of orders guarantee a specific execution price?
A. Market orders
B. Limit orders
C. Stop Orders
D. None of the choices listed
None of these orders guarantees a specific sale or purchase price. Market orders will be executed at the best price available. Stop orders will be executed at the best price available once a trigger price has been hit. Limit orders will only be executed if that can be filled at the specified price or better.
A company's Common stock is selling in the market at "multiple of 15". If the market price of the common stock is currently $10, what is the earnings per share?
what is $.67
When a stock is selling at "multiple of 15", this means that the market price is 15 times the current earning per share. Since the market price is at $10 and the P/E ratio is 15, earning per share is $.67
Why would a company not buy treasury stock?
A. To prevent a hostile takeover?
B. Stock Options
C. Make the stock more affordable to small shareholders
D. Increase earnings per share
what is C
*too long for me to type...summary is that you can do everything but C*
All of the following securities are eligible for trading by the federal reserve EXCEPT:
A. Treasury Bills
B. Bond Anticipation Notes
C. U.S. Government Bonds
D. Federal Home Loan Bank Bonds
What is B.
The Federal Reserve is trading desk can trade securities issued by the U.S Government. Bond Anticipation Notes are municipal issues and are not eligible for Fed trading.
The following statements regarding the Investment Company Act of 1940 are True EXCEPT:
A. It requires all investment companies to register with the SEC
B. It requires the investment company to register any additional funds it wishes to set up with the SEC
C. Reports must be provided to the SEC, but not to its shareholders
D. Registration statements must include a prospectus stating a company's investment objectives and financial conditions
What is C
Investment companies are regulated by the investment Company Act of 1940. This act aims to protect investment company customers from unscrupulous practices by requiring financial disclosures.
Which call covenant MUST be considered when computing the dollar price of a municipal premium bond quotes on a yield basis?
A. Catastrophe call
B. Extraordinary Optional call
C. Sinking fund call
D. In whole call
what is D?
MSRB rules require that if a premium bond is quotes on a yield basis, that the dollar price is computed be the lower of the price computed to any call dates or maturity. This means that the price is computed to give the yield to the near term call date, since the premium is lost in the fastest time.
A customer has purchased three different bonds, each yielding 9%, with a 9%, with 5 year, 10 year, and 15 year maturities. If prevailing interest rates drop by 20 basis points, Which will show the greatest percentage price change?
What is 15 years Maturity
As the interest rates moves, long term maturities will change at a faster rate than short term obligations.
American Depositary receipts pay dividends in:
A. LIBOR units
B. European Currency Units
C. Foreign Currency
D. U.S. Dollars
ADRs pay dividends in U.S. dollars only
All of the following statements are true regarding Treasury STRIPS EXCEPT:
A. the investor's interest rate is locked in at purchase, eliminating any reinvestment risk
B. at maturity, there is no capital gain
C. the income is accreted and taxed annually
D. these are suitable investments for individuals seeking current income and a high level of safety
What is D
What is D
T-STRIPS are government bonds that are "stripped of coupons. They DO NOT provide current income. As the bond is accreted, its cost basis is adjusted upwards so that at maturity the bond has an adjusted cost basis of par. Therefore, no taxable capital gain is realized at maturity. This is a zero coupon obligation with a "locked in" rate of return over the bonds life.
Net Asset Value per share for a mutual fund can be expected to decrease if the:
A. securities in the portfolio have appreciated in value
B. securities in the portfolio have made dividend distributions
C. fund has made dividend distributions to shareholders
D. fund has experienced net redemptions of share
What is C
This is a Tricky question. If a fund distributes a dividend to shareholders, an ex-date is set by the Board of Directors of the the fund. On this date, the Fund's shares are reduced by the value of the distribution.
An "efficient" market is charaterized by:
A. Narrow Spreads and High Trading Volume
B. Wide Spreads and High Trading Volume
C. Narrow Spreads and Low Trading Volume
D. Wide Spreads and Low Trading Volume
What is A?
An efficient market is one where there is a high trading volume, so that the liquidity risk is minimized. As trading volume increases, dealer spreads will narrow, since the dealer doesn't have to makes as much on each trade to be profitable.
Yesterday shares in the ABC closed-end fund traded for $15. Today shares in the same fund sold for $15.35. If the NAV today is $15.50, which of the following is true?
A. Sold at a discount of $0.15
B. Sold at a discount of $0.35
C. Sold at a premium of $0.15
D. Sold at a premium of $0.35
What is A?
Since that shares were purchases for less than the NAV, they must be selling at a discount. To determine the discount, subtract the price from the NAV ($15.50-$15.35=$0.15)
Which Statement is TRUE regarding ADRs?
A. ADRs are vehicles for trading United State securities in foreign countries
B. ADRs are vehicles for trading foreign securities in other overseas markets
C. ADRs market prices are influenced by foreign currency exchange fluctuations
D. ADRs must be redeemable with the sponsor
ADRS are vehicles for trading foreign securities in the United States. Foreign companies do not want to list their actual share for trading in the U.S. because the shares would then have to be registered with the SEC and the company will have to comply with U.S. financial reporting rules (too expensive)
A balloon maturity could refer to:
A. A bond issue that pays a single interest payment and has only one maturity date
B. A serial bond issue that has one maturity which contains a disproportionately large amount of the principal
C. A bond that has an escrow account of funds set aside to pay the principle, which can only be paid at maturity.
What is B
A balloon maturity is one which contains a disproportionately large amount of principal, most often the last maturity
What would NOT be a suitable investment for someone looking for income?
A. Raw Land DPP
B. Existing Housing DDP
C. Developmental Oil and Gas DPP
D. Low Income Housing DPP
What is A
Raw land DPPs buy land for capital appreciation. They do not generate income.
A corporation declares a cash dividend on Wednesday, December 1st. The record date is set at Tuesday, December 21st, with the dividend payable on Friday, December 31st. Based on this information, the ex date is set at Monday, December 20th. The "tax event" occurs on:
A. Wednesday, December 1st
B. Friday, December 20th
C. Tuesday, December 21st
D. Friday December 31st
For tax purposes, payments by issuers to securities holders are considered to be received as of the date the issuer sends the check. In this case, the check is sent on Friday, December 31st, therefore the income is taxable as of this date.
ACME Industries issues preferred stock with a 7% annual dividend. The par value on the preferred stock is $100. The share price of the preferred stock is $105 and the market value of the common stock is $115. How much will and investor with 100 shares of preferred stock receive in dividend payments each quarter in which dividends are paid?
What is $175
The annual per-share dividend is calculated by mutiplying par value by the dividend rate, making it $7 ($100 x 0.0=$7). The quarterly per-share divdend id $1.75($7.00/4 quarters=1.75). That value is then multiplied by the number of share to calculate the total dividend payments per quarter which is $175($1.75 x 100=$175)
Which of the following is not a right of stock ownership?
A. Right to transfer
B. Right to vote
C. Right to protect aganst mismanagement
D. Right to redeem shares from the issuer
What is D
All of the above describe rights that stock ownership ascribes to share holders except the right to redeem share from the issuer. The stockholder can sell them to others on the open market, but can not demand that the issuer buy them back and redeem them. Owners of open-end funds can redeem shares
Which statement regarding Freddie Mac is FALSE?
A. Freddie Mac buys conventional mortgages from financial institutions
B. Freddie Mac is an issuer of mortgage backed pass-through certificates
C. Freddie Mac debt issues are directly guaranteed by the U.S. Government
D. Freddie Mac is a corporation that is publicly traded
What is C
*I refuse to write anything futher*
Samuel wants a mutual fund that invests in a mixture of stocks and bonds so he can take advantage of lower volatility than an equity fund and higher returns than a bond fund. Which of the following funds would be most suitable for Samuel?
A. Growth and Income Fund
B. Blend Fund
C. Value Fund
D. Balanced Fund
What is D?
Balanced funds contain equities for appreciation and bonds for income. The objective of a balanced fund is to achieve lower volatility than an equity fund and higher returns than a bond fund.
A registered representative receives a phone call from a customer who tell the rep to "sell my 500 shares of ABC stock at the marker." The rep has the record of the customer buying the shares 2 years ago, but the shares were transferred into the customers name and shipped to their home address. The rep asks the customer where the shares are and they respond "the share are in my fireproof safe" the rep should:
A. Not accept the order because the stock is not in custody of the broker-dealer
B. Accept the order, but mark the order ticket short because the shares are not in the custody of the broker-dealer
C. Accept the sell order, but mark the ticket long because it can be reasonably expected that the customer will deliver the shares by settlement
D. Not accept the sell order because the stock is not in good deliverable form
What is C?
Under SEC rules. a sell order can be marked "long" if the rep determines the location of the shares and it can reasonably be expected that the shares will be delivered on settlement/ The rep determined that the customers has the shares are home and since this is a long-time customer, it can be assumed that they will deliver them on settlement.
ABC Corporation has declared a 3:2 stock split to shareholders of recoord on November 10th. The price of the stock will be reduced on ex date by:
A. 13%
B. 33%
C. 50%
D. 150%
Since the stockholder has 1.5 times the number of shares after the spilt, the market price will be reduced on ex date by factor of 1.5. Assume the market price of the stock is $60 before the spilt. After the split the new market price is $60/1.5=$40. The new price is $20 less than the original $60, which is a 33% reduction from the original price/ ($20 reduction/$60 original price= 33%)