XYZ County Sewer Revenue 6.5% municipal bonds mature in 20 years. If they are currently offered at 92, they have a yield to maturity of approximately - Answer- A)
7.19%.*
B)
5.96%.
C)
6.50%.
D)
6.23%.
A customer interested in a collateralized mortgage obligation (CMO) might look to which ...
a customer interested in a collateralized mortgage
your customer who lives in state a is in the hig
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SERIES 7 PRACTICE EXAM
XYZ County Sewer Revenue 6.5% municipal bonds mature in 20 years. If they are currently offered at 92, they have a yield to maturity of approximately - Answer- A)
7.19%.*
B)
5.96%.
C)
6.50%.
D)
6.23%.
A customer interested in a collateralized mortgage obligation (CMO) might look to which
of the following for historical data or projections regarding mortgage prepayments? - Answer- A)
DEA
B)
PSA
C)
FINRA
D)
Bond Buyer *
Your customer, who lives in State A, is in the highest federal and state income tax bracket. She is considering purchasing some State B municipal bonds with an Aa rating for her portfolio. You correctly explain that municipal bonds generally pay - Answer- A)
higher interest rates than corporate issuers of the same quality and maturity, but this is offset by the more favorable tax treatment of the interest.
B)
lower interest rates than corporate issuers of the same quality and maturity because the
interest is tax free on a state, local, and federal level.
C)
lower interest rates than corporate issuers of the same quality and maturity because of the tax treatment of their capital gains.
D)
lower interest rates than corporate issuers of the same quality and maturity because of the tax treatment of their interest. *
A customer who is long 500 shares of XYZ writes 7 calls against the position. This is an example of - Answer- A)
a vertical spread.
B)
portfolio insurance.*
C)
a long straddle.
D) a ratio write.
A bond is quoted as QRS Zr 39. This quote tells an investor that the bond - Answer- A)
pays interest semiannually.
B)
pays no interest until maturity.*
C)
is backed by the U.S. government.
D)
pays interest annually.
The OCC must receive exercise instructions for equity options no later than - Answer- A)
4:10 pm ET on the third Friday of the expiration month.
B)
4:00 pm ET on the third Friday of the expiration month.*
C)
5:30 pm ET on the third Friday of the expiration month.
D)
11:59 pm ET on the Saturday before the third Friday of the expiration month.
Your client, age 52, is considering taking distributions from her qualified retirement plan.
A portion of her contributions were made with after-tax dollars. Which of these is correct? - Answer- A)
Distributions of earnings are 100% taxable, and a 10% penalty will be applied to the distributions.*
B)
Distributions of cost basis is 100% taxable, and a 10% penalty will be applied to the distributions.
C)
Distributions of earnings are tax free, but a 10% penalty will be applied to the distributions.
D)
Distributions of earnings are tax free, and there will not be a penalty applied to the distributions.
A bond is being issued to build a toll road. It has been identified that the state does not own all of the property that the road is going to be built upon. This would most likely be disclosed in - Answer- A)
the prospectus.
B)
the trust indenture.
C)
the bond resolution.*
D)
the qualified legal opinion. A municipality wants to issue industrial revenue bonds to benefit a local company who employs hundreds of the municipality's residents. Regarding these bonds, which of the following is true? - Answer- A)
Interest is paid from revenues collected through property assessments and taxes.
B)
The issuance of these bonds would require voter approval.
C)
The credit rating of the bonds is dependent on the credit rating of the company, not the municipality.*
D)
Because these bonds are used for a nonpublic purpose, the interest income will not be subject to the alternative minimum tax.
The following information has been reported for ABC stock:
Annual dividend = $2
PE ratio = 20
Closing price = $100
What is the dividend payout ratio? - Answer- A)
40%*
B)
20%
C)
2%
D)
30%
Your customer has just signed a limited partnership subscription agreement. Regarding the signing of this agreement, it is important for the customer to know that - Answer- A)
the customer will be considered a limited partner only after the subscription agreement has been signed by the general partner.*
B)
the registered representative (RR) and general partner are required to sign before the customer can become a limited partner.
C)
a new agreement is required anytime assets in the partnership are bought or sold.
D)
a copy of the agreement signed by all partners must be filed with the SEC.
A registered representative (RR) correctly explains to a new customer who wants to learn about the tax and risk characteristics of collateralized mortgage obligations (CMOs) that the securities are - Answer- A)
tax exempt at the federal level and do not have fixed maturity dates.
B)
tax exempt in the states where the mortgages originated from and they subject holders to prepayment risk. C)
taxable at all levels and subject the holders to prepayment risk.*
D)
taxable only in the state where the mortgages originated from and are backed by the federal government.
A debt securities analyst is examining a municipality's statutory debt limit, which he knows can limit the issuer from - Answer- A)
raising property taxes.
B)
limiting or capping property taxes.
C)
issuing revenue bonds.
D)
issuing general obligation bonds.*
An immediate dilution to earnings per share (EPS) would be least likely to occur from - Answer- A)
refunding a bond at par.*
B)
a 10% stock dividend.
C)
conversion of debentures.
D)
a 2:1 stock split.
A toll road authority issues a revenue bond backed by the revenue stream from the tolls collected. In addition, the state has agreed to cover any shortfall. This bond is categorized as - Answer- A)
a double-barreled bond.
B)
an overlapping debt issue.*
C)
a moral obligation bond.
D)
an industrial revenue bond.
Which of the following is not a characteristic associated with auction rate securities (ARS)? - Answer- A)
Are backed by the full faith and credit of the U.S. federal government*
B)
Use a Dutch auction method to establish a new clearing rate
C)
Have the risk of failed auctions
D)
Are long-term securities that reset the rate paid at predetermined short-term intervals
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