General Securities Representative Flashcards

A customer in the 32% federal tax bracket purchases a municipal bond yielding 4.5%. What is the taxable equivalent yield?

Answer: 6.62%

Taxable equivalent yield = 4.5% / (1 − 0.32) = 4.5% / 0.68 = 6.62%.

Which of the following describes a 'fill or kill' (FOK) order?

Answer: Execute the entire order immediately or cancel it completely

A fill or kill order requires the entire order to be executed immediately; if not, it is cancelled in full.

Under Regulation T, the initial margin requirement for purchasing equity securities is:

Answer: 50%

Regulation T, set by the Federal Reserve, requires an initial margin deposit of 50% of the purchase price of equity securities.

An investor buys a 10-year Treasury bond with a 5% coupon at a price of 110. Which statement is TRUE about the yield?

Answer: The yield to maturity is less than the coupon rate

When a bond is purchased at a premium (above par), its yield to maturity is less than the coupon rate.

Which of the following is NOT a characteristic of exchange-traded funds (ETFs)?

Answer: They are priced once daily at the close of the market

ETFs trade throughout the day on exchanges at market prices, unlike mutual funds which are priced once per day at NAV.

A customer wants to hedge a long portfolio of blue-chip stocks against a market decline. Which strategy is most appropriate?

Answer: Buy put options on the S&P 500 index

Buying index put options provides downside protection by gaining value as the market declines, offsetting losses in the portfolio.

Which regulatory body sets the minimum maintenance margin requirement for long stock positions in margin accounts?

Answer: FINRA

FINRA Rule 4210 sets the minimum maintenance margin at 25% for long equity positions, though individual firms may impose higher requirements.