FINRA Securities Industry Essentials 3

Question 1

An investor who sells a call option they do not own the underlying shares for is engaging in:

Accepted Answer

Naked call writing

Answer

Writing a call without owning the underlying shares is a naked (uncovered) call, which carries theoretically unlimited risk.

Question 2

Under the Investment Company Act of 1940, a mutual fund is required to redeem shares:

Accepted Answer

Within 7 days of a redemption request

Answer

Open-end investment companies (mutual funds) must stand ready to redeem shares within seven calendar days of receiving a redemption request.

Question 3

Which of the following is a characteristic of a negotiable certificate of deposit (CD)?

Accepted Answer

It is issued in large denominations and can be traded in the secondary market

Answer

Negotiable CDs are issued typically in denominations of $100,000 or more and can be sold in the secondary market before maturity.

Question 4

What does the term 'ex-dividend date' mean for a stock?

Accepted Answer

The first date on which a buyer of the stock will not receive the upcoming dividend

Answer

On or after the ex-dividend date, a purchaser of the stock is not entitled to the declared dividend; it belongs to the seller.

Question 5

Under Regulation T, the Federal Reserve sets the initial margin requirement for purchasing securities. What is the current standard initial margin requirement?

Accepted Answer

50%

Answer

Regulation T currently requires investors to deposit at least 50% of the purchase price of marginable securities when buying on margin.

(FINRA) FINRA Exams Practice Test

(FINRA) FINRA Exams Practice Test

FINRA Securities Industry Essentials 3