Bonds
The par value of a bond
$1,000
True or false: An inverse leveraged ETF would be suitable for an elderly woman with a low risk tolerance.
False
Can a customer open an account with their school issued ID?
No. USA Patriot Act states that a government issued ID must be used. DL, Passport, etc.
A call option is IN THE MONEY when the market price is _______ (as) the strike price.
a). Above
b). Below
c). The same
a). Above
A stock that trades for less than $5 per share is considered a _______
Penny Stock
A bond selling at a premium will have a YTM of
a). $1,000
b). less than $1,000
c). more than $1,000
b). less than $1,000
TEETER TOTTER
True or False: High yield bonds (Junk bonds) are suitable for low to medium risk investors.
False.
Suitable for high-risk, speculative investors
There are 3 stages of money laundering. What are they?
1) Placement
2) Layering
3) Integration
How many shares of stock make up 1 option contract?
100
SIPC protects a customer up to $______ for each separate customer of which no more than $____ can be cash.
a) $100,000; $100,000
b) $250,000; $500,000
c) $500,000; $500,000
d) $500,000; $250,000
d) $500,000; $250,000
What bond rating is considered the best rating?
*According to Standard & Poor's scale
AAA
Moody's is Aaa
Which of the following investment portfolios in MOST stable:
a) an aggressive growth fund
b) an income fund
c) a balanced fund
d) a specialty fund
c) a balanced fund
Excessively trading in a customers account for the sole purpose of generating commissions is a violative practice known as ______.
Churning
A customer would buy call contracts because the customer:
a) is bullish on the underlying security
b) is bearish on the underlying security
c) wished to generate ordinary income
d) wishes to defer taxation of gains on the underlying stock
a) is bullish on the underlying security
What is the order of payment in the event of liquidation?
a). Secured, Preferred, unsecured, subordinated debentures, Common
b). Preferred, Common, Secured, subordinated debentures
c). Secured, Unsecured, Subordinated Debentures, Preferred, Common.
c). Secured, unsecured, subordinated debentures, preferred, common
A bond with a current yield of 6.25% and a YTM of 6.33% has a market value ______ its par value.
a). Greater than
b). Less than
c). There isn't enough information to answer
d). Equal to
a). Less than
Remember CY - YTM - YTC
a) bonds
b) ADR's
c) REIT's
d) Options
This act was established to require the full & fair disclosure of pertinent information relating to securities sold in interstate commerce and through the mail. Also known as the Paper Act.
Securities Act of 1933
A customer buys 100 shares of ABC stock at $56 AND buys 1 ABC Oct 55 Put @3.50 on the same day. The maximum potential gain is:
a) $5,150
b) $5,850
c) $5,950
d) unlimited
This is a hedge. If the stock rises, they will let the put expire out of the money and sell the stock at the higher market price. The potential gain is unlimited.
An investor is following the new issue municipal bond market. The primary source material is found in the Daily Bond Buyer. This publication is distributed on:
a). a weekly basis
b). an as needed basis
c). a daily basis
d). a monthly basis
b). a daily basis
True or False: A coupon rate of 4.5% means an annual coupon payment of $45
True
4.5% x $1,000 = 0.045 x $1,000 = $45
An older lady, in the lowest tax bracket, wants an investment that will provide asset growth for retirement. The best recommendation is:
a) emerging market fund
b) single stock
c) muni bond
d) index fund
d) index fund
Muni bond isn't appropriate for low tax bracket and offers little growth. Others are too risky
BD's & financial institutions must a currency transaction report (CTR) for any cash or cash equivalent deposits, withdrawals, or transfers of $_____ or more.
$10,000
SAR is submitted for sus activity of$5,000 or more
A customer buys 200 shares of BEN at $72 and sells 2 BEN Jun 70 Calls @ $6 each. The maximum potential gain is:
a) $800
b) $1,200
c) $7,000
d) unlimited
a) $800
If market rises, the calls are exercised. The stock (bought at 72) will be sold at 70 (loss of $2 per share). Premium of $1,200 collected. Net gain of $800
Will Ben pass his Series 7 Exam?
Yes