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Practice Exam #3 Study Guide with Complete Solutions Popular Investment Securities, a FINRA member firm, produces short videos describing the general characteristics of different types of securities. Periodically, an interstitial appears during the video. Under FINRA's rules on communications w...

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  • September 25, 2024
  • 40
  • 2024/2025
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TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024

Practice Exam #3 Study Guide with
Complete Solutions


Popular Investment Securities, a FINRA member firm, produces short videos describing

the general characteristics of different types of securities. Periodically, an interstitial

appears during the video. Under FINRA's rules on communications with the public? -

Answer✔️✔️--the appearance of the interstitial defines the video as retail communication

requiring filing.




*Probably the best example of an interstitial is the pop-up ad. Sometimes it is a full-page

ad causing the viewer to see the advertisement before being able to see the rest of the

content. Without the interstitial, a generic video describing general characteristics of a

type of security would not require filing. But, once that advertisement pops up, it is now

retail communication and must be filed.

Most business development companies (BDCs) are classified as? - Answer✔️✔️--

Closed-ended investment company

If your client has a $21,000 net capital loss this year, and he plans to apply the

maximum deduction toward his ordinary income for the year, after this year, he may? -




1/40

,TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024
Answer✔️✔️--deduct a maximum of $3,000 per year and carry the remaining loss forward

indefinitely.



*Capital losses may be used to offset capital gains. Once all capital gains have been

offset, $3,000 of net capital losses may be used to offset ordinary income annually.

Remaining losses may be carried forward in future years until the loss is exhausted.

An investor has a diversified portfolio of common stock with a market value of $1.7

million and a beta of 1.20. If the OEX (S&P 100) is currently quoted at 680, to protect

the portfolio against a decline in value, the investor's best strategy is to buy? -

Answer✔️✔️--30 PUTS



*Buying puts is the most effective strategy to hedge the risk of decline in a stock

portfolio's market value.To determine the number of option contracts necessary to

hedge:portfolio value ($1.7 million)/market value of the index (68,000).Multiply the result

(25) by the beta of 1.20. The result is 30 contracts.

Most investment professionals believe that a diversified portfolio is the best choice for

the typical investor. Diversifying a portfolio can be accomplished by doing all of the

following except? - Answer✔️✔️--buying securities from different broker-dealers.

Potential investment company clients should be advised to investigate a fund by looking

at which of the following? - Answer✔️✔️--Portfolio

-Investment Policy

2/40

,TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024



*Investment policy, track record, portfolio, and sales load should all be researched when

assessing a fund. The identity of the custodian bank for the fund, or number of shares

outstanding, does not bear on its performance or suitability.

Which of the following is not considered when trying to diversify a municipal bond

portfolio? - Answer✔️✔️--Price



*One of the purposes of diversifying a municipal bond portfolio is to spread the risk

among the portfolio's issues. This can be accomplished by buying bonds of differing

maturities, geographical locations, and quality.

The writer of a combination expects the market to be? - Answer✔️✔️--Stable



*The writer, or seller, of a combination expects the market to be stable. The buyer of a

combination expects the market to be volatile. Combinations and straddles are never

bullish or bearish, as there are always both calls and puts involved in the strategy,

which are both bullish and bearish. Remember, the definition of a combination is a put

and a call on the same underlying security with the strike prices and/or the expiration

months being different.

In a new margin account, a customer sells short 1,000 shares of XYZ at $30 per share

and deposits the required margin. If the stock subsequently falls to $25 per share, the

equity in the account is? - Answer✔️✔️--$20,000


3/40

, TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024
A customer sold 100 shares of QRS short when the stock was trading at 19. If QRS is

now trading at $14, and she wants to protect her gain, which of the following orders

should she place? - Answer✔️✔️--Buy-Stop @ $14.25



*A buy limit order is used to buy at a lower price (when the market moves down). A buy

stop order is used to buy in a short position at a higher price (when the market moves

up). To protect the gain, a buy stop order would be placed just above where the stock is

currently trading.

Rank the following in the usual sequence of order allocation?

1-Syndicate

2-Member at the take down

3-Presale

4-Designated - Answer✔️✔️--Presale, Syndicate, Designated and Member.



*PGDM "Professional Golfers Don't Miss".

*The standard order priority for allocation of municipal bond issues is (as stated within

the syndicate letter): presale, syndicate, designated, and member. Orders that benefit

all syndicate members have the highest priority.

A direct participation program shows the following operating results for the year:

Revenues: $3 million

-Operating expense: $1 million


4/40

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