Equity and Debt!
A company that has issued cumulative preferred stock:
A- forces conversion of the preferred that is trading at a discount to par, thereby eliminating the need to pay past-due dividends.
B- pays the preferred dividend before paying the coupons due on its outstanding bonds.
C- pays the current dividends on the preferred, but not the past dividends on the preferred, before paying a dividend on the common.
D- pays past and current preferred dividends before paying dividends on common stock
D- pays past and current preferred dividends before paying dividends on common stock
All of the following issue mortgage-backed securities except:
A- Sallie Mae.
B- Fannie Mae.
C- Ginnie Mae.
D- Freddie Mac.
A- Sallie Mae.
If a customer buys 1 OXY Oct 50 call at 3, and the holder exercises the option when the stock is trading at 60, what is the cost basis of the 100 shares?
A- $6,300
B- $5,300
C- $6,000
D- $5,000
B- $5,300
A married couple are both employed by firms that cover them under the company pension plans, and each earns approximately $300,000 annually. If they both open a traditional IRA and make the maximum contribution, how much of their contribution could they deduct?
A- They are ineligible to deduct any contribution made.
B- Both may deduct the entire contribution.
C- Neither is eligible to make a contribution in any amount (deductible or not).
D- Only one spouse is eligible to deduct their entire contribution.
A- They are ineligible to deduct any contribution made.
When an underwriting syndicate commits to distribute an entire offering, it may enlist other FINRA member firms to help in the offering. These member firms are known as:
A- syndicate participants.
B- selling group members.
C- affiliated members.
D- co-managers.
B- selling group members.
New offering: 800,000 units at $6 per unit. Each unit has two shares of common stock and one warrant. Each warrant is to purchase half a share of common stock. Based on this information, how many shares of stock will be sold, and how many warrants will be sold?
A- 800,000 shares and 200,000 warrants
B- 800,000 shares and 400,000 warrants
C- 1.6 million shares and 400,000 warrants
D- 1.6 million shares and 800,000 warrants
D- 1.6 million shares and 800,000 warrants
Cash dividends from real estate investment trusts (REITs) are taxed as:
A- long-term capital gains.
B- not taxed.
C- taxed as ordinary income.
D- taxed at a maximum rate for qualified dividends.
C- taxed as ordinary income.
With ABC trading at 39, a customer buys 1 ABC Mar 40 call and sells 1 ABC Mar 35 call. A profit occurs if:
I. the spread widens.
II. the spread narrows.
III. ABC declines sharply.
IV. both contracts are exercised.
A- III and IV
B- II and III
C- II and IV
D- I and III
B- II and III
A customer of MNO, Inc., a registered broker-dealer, has a traditional IRA funded by a mutual fund. The customer, who is 70 years old as of June 30, 2023, must take a minimum distribution no later than what age to avoid a penalty?
A- 71
B- 73
C- 59 1/2
D- 70 1/2
B- 73
An investor sells 1,000 shares of DEF short at 50 and meets the initial margin requirement. If DEF falls to 45, what is the equity in the account?
A- $40,000
B- $35,000
C- $30,000
D- $20,000
C- $30,000
A registered representative mentions a particular 6% municipal bond quoted on a 6.5% basis. Which of the following is correct?
I. Six percent is the bond's coupon.
II. Six percent is the bond's current yield.
III. Six-and-a-half percent% is the bond's yield to maturity.
IV. Six-and-a-half percent% is the bond's current yield.
A- II and IV
B- I and IV
C- II and III
D- I and III
D- I and III
Which of the following risk factors would be least important to disclose in recommending collateralized mortgage obligation (CMO) securities to public customers?
A- Extended payment risk
B- Interest rate risk
C- Credit risk
D- Prepayment risk
C- Credit risk
A client writes 1 Dec 45 put and buys 1 Dec 60 put. This is a:
A- credit bull spread.
B- a debit bull spread.
C- a credit bear spread.
D- a debit bear spread.
D- a debit bear spread.
A customer wants to buy ABC bonds, and as his representative, you have advised him that the trade is unsuitable. If he decides to go ahead with the purchase, you must:
A- execute the trade specifically as the customer has directed you to do but mark it unsolicited.
B- not execute the trade.
C- execute the trade if FINRA approves.
D- execute the trade only if the customer has previous trading experience in similar securities.
A- execute the trade specifically as the customer has directed you to do but mark it unsolicited.
A resident of Minnesota is in the 28% federal tax bracket and the 4% state tax bracket. This person must pay both federal and state taxes on:
A- Treasury bills.
B- Minneapolis Housing Authority bonds.
C- Federal National Mortgage Association (FNMA) pass-throughs.
D- federal home loan bank notes
C- Federal National Mortgage Association (FNMA) pass-throughs.
A convertible debenture callable at 101 is trading at 105. The debenture carries 4% coupon and is convertible at $25. The common stock is trading at $27. If an investor bought the debenture and converted, the profit would be:
A- $30.
B- $20.
C- $40.
D- $75.
A- $30.
What does "beneficial interest" mean in the context of owning REIT shares?
A- The owner of the shares owns an actual share of the real estate the REIT owns
B- The owner of the shares does not own any of the REIT's real estate but is entitled to the benefits from owning shares
C- The shareholder does not really own the shares but benefits from the REIT's business success
D- The REIT takes a beneficial interest in any real estate that the shareholder owns
B- The owner of the shares does not own any of the REIT's real estate but is entitled to the benefits from owning shares
An investor opens the following options position: Buy 1 FOZ Mar 40 call @3; buy 1 FOZ Mar 40 put @2. What is the investor's maximum gain, maximum loss, and breakeven point?
A- Maximum gain is unlimited; maximum loss is $500; breakeven point is $40.
B- Maximum gain is $3,500; maximum loss is $500; breakeven points are $35 and $45.
C- Maximum gain is $500; maximum loss is unlimited; breakeven point is $40.
D- Maximum gain is unlimited; maximum loss is $500; breakeven points are $35 and $45.
D- Maximum gain is unlimited; maximum loss is $500; breakeven points are $35 and $45.
All of the following statements concerning IRA contributions are true except:
A- if you file your taxes on January 15, you may deduct your IRA contribution even if it is not made until April 15.
B- you may contribute to this year's IRA from January 1 of this year until April 15 of next year.
C- between January 1 and April 15, you may make contributions for the current year, the past year, or both
D- you may make contributions for the past year after April 15, provided you have filed an extension on a timely basis.
D- you may make contributions for the past year after April 15, provided you have filed an extension on a timely basis.
Which of the following investors would be exempt from filing Form 144 when selling securities they own?
A- An employee of the company selling registered shares purchased in the open market
B- An investor selling shares acquired in a Regulation D private placement
C- An affiliated person selling unregistered shares
D- An employee of the company selling unregistered shares
A- An employee of the company selling registered shares purchased in the open market
Reggie owns a convertible bond that converts into 20 shares of common stock. The current market value of the bond was 118½ at the close on Friday, April 1. A 30-day call is announced before the opening on Monday, April 4, at a price of 102. The stock is trading at $57.75. What should Reggie do?
A- Convert the bond into the stock
B- Hold the bond to maturity
C- Redeem the bond at the call price
D- Sell the bond
A- Convert the bond into the stock
Due to an escalating trade war, the portfolio manager of an equity mutual fund anticipates a negative impact on his fund's assets. To protect her investment portfolio, the fund manager would:
A- buy S&P 500 index puts.
B- sell S&P 500 index puts.
C- buy S&P 500 index calls.
D- sell S&P 500 index calls.
A- buy S&P 500 index puts.
A customer buys 1 XYZ Aug 50 put at 1 and sells 1 XYZ Aug 65 put at 10 when XYZ is at 58. If XYZ is at 52 at expiration, the customer has:
A- a gain of $400.
B- a loss of $600.
C- a loss of $400.
D- a gain of $600.
C- a loss of $400.
A smaller business with variable cash flow is looking to establish a pension plan for its 50 employees. It wants a plan that allows it to contribute the largest possible amount for its employees, but wants the flexibility to reduce contributions in lean years. The BEST recommendation is:
A- 401(k) planB- 403(b) plan
C- SEP IRA
D- SIMPLE IRA
C- SEP IRA
Betco Corporation had insufficient liquidity to meet its outstanding debt and was subsequently forced into bankruptcy. There were numerous lawsuits from all of the various creditors and investors against the corporation. Finally, a court settlement was reached to dissolve the company and use the remaining assets to pay off the creditors. Who most likely has the highest priority of getting paid?
A- The senior executives of the corporation because being senior executives gives them the most senior claim to corporate assets
B- The attorneys representing the plaintiffs in the lawsuits against the bankrupt company
C- Investors holding guaranteed bonds because guaranteed bonds provide an ironclad guarantee that the investors always get back the principal amount invested
D- The secured creditors because secured debt is always the most senior security
B- The attorneys representing the plaintiffs in the lawsuits against the bankrupt company