Capital Markets & Offerings
What market is where issuers sell new securities to raise capital?
What is: The primary market
Who enforces MSRB rules for broker-dealers?
What is FINRA
Who declares dividends?
What is The board of directors?
What is the relationship between interest rates and bond prices?
What is Inverse
Which Treasury security matures in under one year?
What is Treasury bills
What investment company issues redeemable shares at NAV?
What is Open-end funds
When the Federal Reserve raises short-term interest rates, which of the following is the MOST immediate impact on the economy?
A. Increased consumer borrowing
B. Slower economic growth
C. Rising corporate profits
D. Lower unemployment
What is
B. Slower economic growth
A company selling additional shares after its IPO is participating in:
A. Secondary market trading
B. A follow-on offering
C. A private placement
D. A tender offer
What is:
B. A follow-on offering
Ultimate authority over SRO rulemaking rests with:
A. FINRA
B. MSRB
C. SEC
D. Federal Reserve
What is:
C. SEC
What happens to stock price after a 2-for-1 stock split?
What is
the price is cut in half?
Which bond feature increases reinvestment risk?
A. Zero coupon
B. Convertible
C. Callable
D. Secured
What is C. Callable
Municipal bonds backed by taxing authority are:
A. Revenue bonds
B. GO bonds
C. Moral obligation bonds
D. Assessment bonds
What is
B. GO bonds
Mutual funds use which pricing method?
A. Backward pricing
B. Negotiated pricing
C. Forward pricing
D. Auction pricing
What is
C. Forward pricing
During an economic contraction, which type of security typically performs BEST relative to others?
A. Growth stocks
B. Long-term corporate bonds
C. Defensive stocks
D. High-yield bonds
What is
C. Defensive stocks
What type of offering allows only existing shareholders to purchase new shares to avoid dilution?
What is
A rights offering
What document must be filed to register an associated person with FINRA?
What is Form U4
What happens to stock price on the ex-dividend date?
What is:
It drops by the dividend amount.
What yield measures annual income relative to market price?
What is
Current yield
What risk is unique to mortgage-backed securities?
What is Prepayment risk
What product trades intraday like a stock?
What is
ETFs
If the Federal Reserve conducts open market sales of Treasury securities, which outcome is MOST likely?
A. Increased bank reserves
B. Lower short-term interest rates
C. Reduced money supply
D. Expansionary monetary policy
What is:
C. Reduced money supply
Which document is distributed during the cooling-off period but omits final pricing?
A. Final prospectus
B. Tombstone ad
C. Red herring
D. Offering circular
What is:
C. A Red herring
What rule prohibits sharing in customer profits or losses without written consent?
What is
Sharing in accounts
Which shareholders have voting rights but no guaranteed dividends?
A. Preferred
B. Bondholders
C. Common
D. Warrantholders
What is
C. Common Shareholder?
Yield reflecting total return if held to maturity is:
A. Nominal yield
B. Current yield
C. Yield to call
D. Yield to maturity
What is D. Yield to maturity
GNMA securities are backed by:
A. FNMA
B. FHLMC
C. The U.S. government
D. Private insurers
What is
C. The U.S. government
Which product is unsecured debt with issuer credit risk?
A. ETF
B. Mutual fund
C. ETN
D. UIT
What is
C. ETN
Which economic indicator is considered a leading indicator of economic activity?
A. Unemployment rate
B. Corporate profits
C. Housing starts (construction)
D. GDP
What is
C. Housing starts (Construction)
Which underwriting arrangement exposes the underwriter to the least financial risk?
What is Best-efforts underwriting?
Excessive trading to generate commissions is known as:
A. Front-running
B. Churning
C. Free-riding
D. Matching orders
What is a:
Front-running
Which feature requires unpaid dividends to be paid before common dividends?
A. Callable
B.Cumulative
C.Convertible
D. Participating
What is B. Cumulative?
What bond trades at a premium when coupon exceeds market rates?
What is A fixed-rate bond
What Treasury security adjusts principal for inflation?
What is
TIPS
Which entity guarantees listed option contracts?
A. FINRA
B. SEC
C. OCC
D. SIPC
What is
C. OCC
Rising inflation with stagnant economic growth is BEST described as:
A. Expansion
B. Stagflation
C. Deflation
D. Disinflation
What is
B. Stagflation
In a firm-commitment underwriting, unsold securities are:
A. Returned to the issuer
B. Cancelled
C. Purchased by the underwriter
D. Sold at a discount to insiders
What is D. Sold at a discount to insiders
What violation occurs when a representative excessively trades an account to generate commissions?
What is Churning?
Which security has priority over common stock but below debt?
A. Warrants
B. Preferred stock
C. Treasury stock
D. Rights
What is B. Preferred stock
Which risk increases with longer maturities?
A. Credit risk
B. Liquidity risk
C. Interest-rate risk
D. Business risk
What is C. Interest-rate risk
Foreign bonds issued in the U.S. by foreign companies are:
A. Eurobonds
B. Yankee bonds
C. Samurai bonds
D. Bulldog bonds
What
B. Yankee bonds
Which option position has unlimited risk?
A. Long call
B. Long put
C. Covered call
D. Short uncovered call
What is
D. Short uncovered call
If real interest rates are negative, which asset class typically benefits MOST?
A. Long-term bonds
B. Cash equivalents
C. Equities and real assets
D. Money market funds
What is
C. Equities and real assets
What type of syndicate allows members to sell securities but not share liability for unsold shares?
What is A selling syndicate?
What regulation protects nonpublic personal customer information?
What is Regulation S-P?
What long-term instrument allows the purchase of stock at a fixed price?
What is A warrant
What bond pays no periodic interest?
What is A zero-coupon bond?
What tax advantage applies to most municipal bond interest?
What is Federal tax exemption?
What option value equals premium minus intrinsic value?
What is
Time value
Which Federal Reserve tool directly affects margin requirements under Regulation T?
A. Discount rate
B. Open market operations
C. Reserve requirements
D. Credit controls
What is
D. Credit controls
What is a Direct Participation Program?
What is an investor buying ownership into an issuer and sharing in profits & losses?
Personal emails sent to 25 or fewer retail investors are classified as:
A. Retail communications
B. Advertisements
C. Correspondence
D. Institutional communications
What is:
C. Correspondence?
Treasury stock is best described as:
A. Authorized but unissued shares
B. Shares owned by insiders
C. Shares repurchased by the issuer
D. Shares held by the SEC
What is C. Shares repurchased by the issuer
The trust indenture outlines:
A. Voting rights
B. Bond covenants
C. Underwriter compensation
D. Market price
What is B. Bond covenants
When interest rates fall, MBS investors face:
A. Extension risk
B. Default risk
C. Prepayment risk
D. Currency risk
What is
C. Prepayment risk
Variable annuity assets are held in the:
A. General account
B. Separate account
C. Custodial account
D. Trust account
What is
B. Separate account
A strengthening U.S. dollar would MOST likely have which effect on U.S. exporters?
A. Increased foreign demand
B. Higher export competitiveness
C. Lower export revenues
D. Rising profit margins
What is
C. Lower export revenues
Why are tombstone ads permitted during the cooling-off period?
They are informational only and do not constitute a prospectus
Sharing in customer profits or losses requires:
A. Verbal approval only
B. Written customer consent only
C. Written firm and customer consent
D. SEC approval
What is
C. Written firm and customer consent
What type of stock emphasizes dividend income over growth?
What is: Income stock
When a bond is purchased at a discount, YTM is:
What is
Higher than the coupon rate
Which bonds typically offer the lowest yields due to safety?
What is U.S. Treasuries?
What alternative investment locks capital for long periods?
What is:
Private equity
During periods of rapid economic expansion, which risk becomes MOST significant for fixed-income investors?
A. Credit risk
B. Inflation risk
C. Liquidity risk
D. Default risk
What is
B. Inflation risk
What exemption allows private placements to avoid SEC registration while limiting resale?
Regulation D
What rule requires firms to establish procedures for business disruptions?
What are Business Continuity Plan (BCP) rules
Why might a company repurchase its own shares?
A. Increase shares outstanding
B. Reduce Equity Prices
C. Avoid dividends
D. Increase Equity Prices
What is
D. Increase Equity prices
Which bonds carry both reinvestment and interest-rate risk?
A. Zero-coupon bonds
B. Callable bonds
C. Treasury bills
D. Floating-rate notes
What is B. Callable bonds
Revenue bonds are repaid from:
A. Property taxes
B. General tax revenue
C. Project income
D. Federal subsidies
What is C. Project income?
What product must distribute 90% of taxable income?
What is
REITs
An inverted yield curve most commonly signals:
A. Rising inflation
B. Strong economic expansion
C. An upcoming recession
D. Increased corporate earnings
What is
C. An upcoming recession