FINRA General Securities Representative 3

Question 1

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

Accepted Answer

6.62%

Answer

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

Question 2

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

Accepted Answer

Execute the entire order immediately or cancel it completely

Answer

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

Question 3

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

Accepted Answer

50%

Answer

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

Question 4

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

Accepted Answer

The yield to maturity is less than the coupon rate

Answer

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

Question 5

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

Accepted Answer

They are priced once daily at the close of the market

Answer

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

(FINRA) FINRA Exams Practice Test