403(b) plans are available to the following groups of people:
I. Government employees
II. Employees of public educational institutions
III. Employees of nonprofit organizations
IV. Self-employed individuals
A. II and III
B. I and II
C. I and IV
D. III and IV - ✔ ✔ A. II and III
A broker-dealer can offer a discounted price for mutual funds in which case? Choose the best answer.
A. If the shares have been available to the public for more than 90 days
B. If the customer meets the breakpoint requirements and the breakpoint schedule is listed in the
prospectus
C. If it is making the sale to a customer who has previously bought mutual fund shares from the firm
D. If it is making the sale to a pre-existing customer - ✔ ✔ B. If the customer meets the breakpoint
requirements and the breakpoint schedule is listed in the prospectus
A broker-dealer executes a sell order for a customer. Ten business days after the settlement date, the
customer has not made delivery of the securities to the broker-dealer. What actions must the broker-
dealer take?
A. notify FINRA
,B. cancel the order
C. buy-in the customer's short position
D. credit the customer's debit balance - ✔ ✔ C. buy-in the customer's short position
A callable bond can be redeemed:
A. At any time the investor wishes to redeem the bond
B. Only at the maturity date
C. Only at a designated date prior to the maturity date
D. Either at the maturity date or prior to the maturity date - ✔ ✔ D. Either at the maturity date or
prior to the maturity date
A competitive underwriting:
A. Always provides for the lowest underwriting risk
B. Allows for substantial pre-selling because a syndicate or selling group can be chosen early in the
process
C. Is the most common type of corporate underwriting
D. Is one in which an issuer solicits bids and chooses an underwriter based on the lowest cost - ✔ ✔
D. Is one in which an issuer solicits bids and chooses an underwriter based on the lowest cost
A convertible bond has a conversion price of $20. The bond contains a non-dilutive covenant. A 2 for 1
stock split has just occurred. Which of the following is true?
A. The conversion price will stay the same
B. The conversion price will be affected, but it is impossible to say whether it will increase or decrease
C. The conversion price will decrease
D. The conversion price will increase - ✔ ✔ C. The conversion price will decrease
A corporate bond has a coupon rate of 2.75%. What is the amount of a single semiannual interest
payment?
,A. $13.75
B. $27.50
C. $275.00
D. $137.50 - ✔ ✔ A. $13.75
A customer has the following position:
Long ABCD Jul 25 call @ 3
What do you know is true about the position?
A. It is in-the-money
B. It is bullish
C. It is bearish
D. It is out-of-the money - ✔ ✔ B. It is bullish
A customer has the following position:
Long ABCD Jul 25 put @ 3
What do you know is true about the position?
A. It is out-of-the money
B. It is bullish
C. It is in-the-money
D. It is bearish - ✔ ✔ D. It is bearish
A customer has the following position:
Long XYZ Jan 50 call @ 6
, What do you know is true about the position?
A. It is out-of-the money
B. It is in-the-money
C. It is bullish
D. It is bearish - ✔ ✔ C. It is bullish
A customer has the following position:
Short XYZ Jan 50 put @ 6
What do you know is true about the position?
A. It is bearish
B. It is out-of-the money
C. It is bullish
D. It is in-the-money - ✔ ✔ C. It is bullish
A customer interested in investing a small amount into equities every month asks you which of the
following investments would keep her trading costs to a minimum:
A. No load index mutual funds
B. Stocks
C. Treasury bills
D. ETFs - ✔ ✔ A. No load index mutual funds
A customer is holding 1000 shares of ABC Co. stock. The price of ABC's stock has risen since she
purchased it. She wishes to hedge her position while generating additional income. Which of the
following best accomplishes her goals?
A. Buy 10 calls on ABC
B. Write 10 calls on ABC
I. Government employees
II. Employees of public educational institutions
III. Employees of nonprofit organizations
IV. Self-employed individuals
A. II and III
B. I and II
C. I and IV
D. III and IV - ✔ ✔ A. II and III
A broker-dealer can offer a discounted price for mutual funds in which case? Choose the best answer.
A. If the shares have been available to the public for more than 90 days
B. If the customer meets the breakpoint requirements and the breakpoint schedule is listed in the
prospectus
C. If it is making the sale to a customer who has previously bought mutual fund shares from the firm
D. If it is making the sale to a pre-existing customer - ✔ ✔ B. If the customer meets the breakpoint
requirements and the breakpoint schedule is listed in the prospectus
A broker-dealer executes a sell order for a customer. Ten business days after the settlement date, the
customer has not made delivery of the securities to the broker-dealer. What actions must the broker-
dealer take?
A. notify FINRA
,B. cancel the order
C. buy-in the customer's short position
D. credit the customer's debit balance - ✔ ✔ C. buy-in the customer's short position
A callable bond can be redeemed:
A. At any time the investor wishes to redeem the bond
B. Only at the maturity date
C. Only at a designated date prior to the maturity date
D. Either at the maturity date or prior to the maturity date - ✔ ✔ D. Either at the maturity date or
prior to the maturity date
A competitive underwriting:
A. Always provides for the lowest underwriting risk
B. Allows for substantial pre-selling because a syndicate or selling group can be chosen early in the
process
C. Is the most common type of corporate underwriting
D. Is one in which an issuer solicits bids and chooses an underwriter based on the lowest cost - ✔ ✔
D. Is one in which an issuer solicits bids and chooses an underwriter based on the lowest cost
A convertible bond has a conversion price of $20. The bond contains a non-dilutive covenant. A 2 for 1
stock split has just occurred. Which of the following is true?
A. The conversion price will stay the same
B. The conversion price will be affected, but it is impossible to say whether it will increase or decrease
C. The conversion price will decrease
D. The conversion price will increase - ✔ ✔ C. The conversion price will decrease
A corporate bond has a coupon rate of 2.75%. What is the amount of a single semiannual interest
payment?
,A. $13.75
B. $27.50
C. $275.00
D. $137.50 - ✔ ✔ A. $13.75
A customer has the following position:
Long ABCD Jul 25 call @ 3
What do you know is true about the position?
A. It is in-the-money
B. It is bullish
C. It is bearish
D. It is out-of-the money - ✔ ✔ B. It is bullish
A customer has the following position:
Long ABCD Jul 25 put @ 3
What do you know is true about the position?
A. It is out-of-the money
B. It is bullish
C. It is in-the-money
D. It is bearish - ✔ ✔ D. It is bearish
A customer has the following position:
Long XYZ Jan 50 call @ 6
, What do you know is true about the position?
A. It is out-of-the money
B. It is in-the-money
C. It is bullish
D. It is bearish - ✔ ✔ C. It is bullish
A customer has the following position:
Short XYZ Jan 50 put @ 6
What do you know is true about the position?
A. It is bearish
B. It is out-of-the money
C. It is bullish
D. It is in-the-money - ✔ ✔ C. It is bullish
A customer interested in investing a small amount into equities every month asks you which of the
following investments would keep her trading costs to a minimum:
A. No load index mutual funds
B. Stocks
C. Treasury bills
D. ETFs - ✔ ✔ A. No load index mutual funds
A customer is holding 1000 shares of ABC Co. stock. The price of ABC's stock has risen since she
purchased it. She wishes to hedge her position while generating additional income. Which of the
following best accomplishes her goals?
A. Buy 10 calls on ABC
B. Write 10 calls on ABC
