Stock Broker Investment Products & Securities Types 2

Question 1

What is a Real Estate Investment Trust (REIT) and how must it distribute income to maintain its tax-advantaged status?

Accepted Answer

A publicly traded company that must distribute at least 90% of taxable income to shareholders

Answer

A private fund that reinvests all earnings

Answer

A government bond tied to real estate prices

Answer

A savings account backed by mortgage securities

Question 2

Which type of annuity provides a guaranteed fixed payment amount throughout the payout period?

Accepted Answer

Fixed annuity

Answer

Variable annuity

Answer

Indexed annuity

Answer

Immediate variable annuity

Question 3

What is a money market instrument, and which of the following is an example?

Accepted Answer

A short-term debt security; Treasury bills (T-bills)

Answer

A long-term bond; US Treasury 30-year bond

Answer

A stock derivative; put option

Answer

A real estate fund; REIT

Question 4

An American Depositary Receipt (ADR) allows US investors to do which of the following?

Accepted Answer

Invest in foreign company shares traded on US exchanges in US dollars

Answer

Invest in US companies on foreign exchanges

Answer

Avoid paying taxes on foreign dividends

Answer

Trade futures contracts on foreign currencies

Question 5

Which type of option gives the holder the right, but not the obligation, to SELL shares at a specified strike price?

Accepted Answer

Put option

Answer

Call option

Answer

Covered option

Answer

Naked option

Question 6

What is a municipal bond, and what is its primary tax advantage for investors?

Accepted Answer

A bond issued by state/local governments; interest is generally exempt from federal income tax

Answer

A corporate bond; deductible interest

Answer

A US Treasury bond; exempt from state taxes only

Answer

A foreign government bond; no US taxes