STOCKBROKER Test 2

Question 1

Convertible preferred stock's price is more influenced by _______________ and less by _______________ than other types of preferred stock.

Accepted Answer

The price of the common stock; interest rates

Answer

Interest rates; the price of the common stock

Answer

Its dividend amount; its par value

Answer

Its par value; its dividend amount

Question 2

Randy has suggested a particularly complicated collateralized debt obligation (CDO). He doesn't comprehend the CDO, but it has provided excellent returns in its five years of existence. According to Roger, customers with a high-risk tolerance should buy and hold the CDO. He proposes allocating up to 10% of a customer's portfolio depending on the individual.
Which of the following assertions about Roger's suitability duties is correct?

Accepted Answer

Randy has not met his reasonable-basis suitability obligation

Answer

Randy has not met any of his suitability obligations

Answer

Randy has not met his quantitative suitability obligation

Answer

Randy has met all of his suitability obligations

Question 3

Andrew has 200 ABC Corp shares at $60 each, with a long market value of $12,000. He has a $6,000 equity. What price will Andrew receive a margin call if ABC Corp falls?

Accepted Answer

$40

Answer

$70

Answer

$42

Answer

$35

Question 4

Which of the following measures is the greatest for a bond investor to decrease credit risk while also guarding against buying power risk?

Accepted Answer

Invest in bonds from many different issuers

Answer

Invest mainly in municipal bonds

Answer

Invest mainly in Treasuries

Answer

Invest primarily in high-yield bonds

Question 5

Jane currently resides in the state of Minnesota. She's thinking about investing in a 5% Washington municipal bond. She pays 20% federal and 4% state taxes. To be similar to a municipal bond, what yield will the corporate bond have to pay?

Accepted Answer

6.25%

Answer

6.58%

Answer

5%

Answer

4%

Question 6

The subtotal that emerges from removing cost of goods sold and operating expenses from sales on a company's income statement is:

Accepted Answer

Operating profit

Answer

Gross profit

Answer

Retained earnings

Answer

Net income

Question 7

When is it permissible for a mutual fund to deliver a summary prospectus instead of a statutory prospectus?

Accepted Answer

If the company keeps the statutory prospectus readily available online

Answer

If the customer has prior experience with mutual funds

Answer

Always

Answer

If it's accompanied with a statement warning investors to think carefully about the fund's investing objectives, risks, and charges/expenses, it's a good sign.

Question 8

The following positions are available to Joseph:
Long XYZ call on September 30th At 4
XYZ (short) Call at 1 p.m. on September 40.
On the expiration day, the price of XYZ is $42. How much money did Joseph make or lose if any of the money options were used?

Accepted Answer

$700 gain

Answer

$300 loss

Answer

$900 gain

Answer

$400 gain

Question 9

In order to give an opinion on a new municipal bond issue, bond counsel will look at everything except:

Accepted Answer

Securities Act of 1933

Answer

Tax code and interpretive regulations

Answer

Municipal statutes

Answer

State constitution and amendments