1. If a bond’s YTM is 6 percent, which of the following would MOST likely be refunded by the issuer?

1. Coupon 6½ percent, maturing in 2030, callable in 2020 at 104
2. Coupon 5½ percent, maturing in 2030, callable in 2019 at 104
3. Coupon 5½ percent, maturing in 2030, callable in 2019 at 100
4. Coupon 6½ percent, maturing in 2030, callable in 2020 at 100

(A) I and II

(B) II and IV

(C) II only

(D) IV only

2. Which of the following have ownership positions in a corporation?

1. Convertible bondholders
2. Convertible preferred stockholders
3. Common stockholders
4. Mortgage bondholders

(A) II and III

(B) I, II, III, and IV

(C) II and IV

(D) II only

3. Common stockholders of PXPX Corporation have which of the following rights and privileges?

(A) The right to receive an audited financial report weekly

(B) The right to vote for cash dividends to be paid

(C) A residual claim to assets at dissolution

(D) The right to vote for stock dividends to be paid

4. Which of the following types of preferred stock allows the investor to reduce inflation risk?

(A) Cumulative

(B) Noncumulative

(C) Convertible

(D) Participating

5. CSA common stock presently has an earnings per share of $3 and pays a $0.30 quarterly dividend. If CSA’s market price is $48, what is the current yield?

(A) 0.67 percent

(B) 2.5 percent

(C) 5.0 percent

(D) 5.25 percent

6. Which of the following U.S. government securities are quoted on a discount yield basis?

(A) Treasury bills

(B) Treasury bonds

(C) Treasury notes

(D) Both A and C

7. On Wednesday, March 16, one of your customers purchases ten 6 percent Treasury bonds maturing in 2030. If the bonds pay interest on January 1 and July 1, how many days of accrued interest are added to the purchaser’s price?

(A) 75

(B) 76

(C) 79

(D) 80

8. Jake Hanson lives in New York and is considering purchasing a bond. He has settled on either a 5 percent municipal bond offered by New York or a 7 percent corporate bond offered by The Greenhorn Corporation, which has headquarters in New York. Jake needs some guidance and would like you to help him determine which bond will provide him with the greatest return. Which of the following information do you need to obtain before you can make the appropriate recommendation?

(A) The business of his employer

(B) His current tax bracket

(C) How long he has lived in New York

(D) His other holdings

9. An investor who is long a call option will realize a profit if exercising the option when the underlying stock price is

(A) below the strike price minus the premium paid

(B) above the strike price

(C) above the strike price plus the premium paid

(D) below the strike price

10. One of your clients is new to investing and has limited resources. Which of the following investments would you least likely recommend to this investor?

(A) Growth funds

(B) T-bills

(C) Blue-chip stock

(D) Collateralized debt obligations

11. Which of the following is required on the registration statement for a new issue?

1. The capitalization of the issuer
2. Complete financial statements
3. What the money raised will be used for
4. The names and addresses of all of the issuer’s control persons.

(A) I, II, and III

(B) I, III, and IV

(C) I, II, and IV

(D) I, II, III, and IV

12. Under the Securities Act of 1933, which of the following securities must be registered with the SEC?

(A) Closed-end funds

(B) Variable annuities

(C) Open-end funds

(D) All of the above

13. Which of the following are exempt transactions?

1. Securities issued by the U.S. government
2. Securities issued by banks
3. Intrastate offerings
4. Regulation A offerings

(A) I and IV

(B) III and IV

(C) I, II, and III

(D) I, II, III, and IV

14. A customer’s confirmation must include

1. the customer's account number
2. whether the customer bought, sold, or sold short
3. the price of the security
4. the markup, markdown, or commission

(A) I and III

(B) II and IV

(C) I, III, and IV

(D) I, II, III, and IV

15. Which of the following would qualify as management companies?

(A) Mutual funds

(B) Unit investment trusts

(C) Closed-end funds

(D) Both A and C

16. Which of the following is TRUE regarding qualified retirement plans?

(A) Contributions are made with 100 percent pretax dollars.

(B) Contributions are made with 100 percent after-tax dollars.

(C) Distributions are taxable only prior to age 59½.

(D) Distributions are subject to a 10 percent penalty.

17. Variable annuities must be registered with the

1. Department of State
2. State Banking Commission
3. State Insurance Commission
4. Securities and Exchange Commission

(A) I and II

(B) I and III

(C) I and IV

(D) III and IV

18. All of the following items must be included on a trade confirmation EXCEPT

(A) the customer’s account number

(B) the customer’s signature

(C) the price of the security

(D) the commission, if the trade took place on an agency basis

19. The safeguarding of customer's non-public information is covered under

(A) Regulation T

(B) Regulation D

(C) Regulation A

(D) Regulation S-P

20. An agent’s recommendations to a customer

1. must be approved in advance by a manager
2. must be in line with the customer’s risk tolerance and investment objectives
3. must be reviewed by a principal if they result in a trade
4. must be in accordance with Federal Reserve Board rules

(A) I and IV

(B) II and III

(C) II, III, and IV

(D) I and II

21. If one of your clients wants to order municipal securities that you believe to be unsuitable for her investment objectives, what should you do?

(A) Execute the order as long as you mark the order ticket as “unsolicited.”

(B) You must refuse the order unless the client changes her investment objectives.

(C) You must obtain the permission of the firm’s compliance officer before executing the order.

(D) You may only execute the order with prior permission of a principal of the firm.

22. Mr. T. Jefferson bought ten municipal bonds at 105 with ten years to maturity. Three years later, he sold the bonds for 102. His tax consequence is a

(A) $150 gain

(B) $150 loss

(C) $300 gain

(D) $300 loss

23. Qualified cash dividends are currently taxed at which rates?

1. 0 percent
2. 10 percent
3. 15 percent
4. 20 percent

(A) I and II

(B) I, III, and IV

(C) III and IV

(D) II, III, and IV

24. All broker-dealers need to maintain customer identification programs and should check the names of all new clients against

(A) a list maintained by the SEC

(B) a do-not-call list maintained by the firm

(C) a list compiled by FINRA

(D) a list of specially designated nationals (SDNs) maintained by OFAC

25. Which of the following statements is NOT true of life-cycle funds?

(A) As life-cycle funds get nearer to their target date, the portfolio holdings will be adjusted to purchase more equity securities and less fixed-income securities.

(B) These funds are usually set up as funds of funds.

(C) The asset allocation of the fund will be rebalanced on a regular basis to make sure that the risk/reward balance is correct given the target date of the fund.

(D) The objective of the fund assumes that most investors cannot tolerate as much risk as they get older.

26. Mutual fund account statements must be sent out at least

(A) monthly

(B) quarterly

(C) semiannually

(D) annually

27. Which of the following securities are subject to systematic risk?

1. common stock
2. preferred stock
3. municipal bonds

(A) I and II

(B) II and III

(C) I and III

(D) I, II, and III

28. Secured bonds include

1. equipment trusts
2. income bonds
3. mortgage bonds
4. debentures

(A) I and II

(B) I and III

(C) III and IV

(D) I, II, III, and IV

29. This type of municipal fund security is also know as a qualified tuition plan.

(A) ABLE accounts

(B) LGIPs

(C) Section 529

(D) TANs

30. An investor with no other position in XYZ writes 1 XYZ Aug 30 put at 2.75. If the put option is exercised when XYZ is trading at 27.50 and the investor immediately sells the stock in the market, what is his gain or loss?

(A) $25 gain

(B) $25 loss

(C) $250 gain

(D) $250 loss

31. Mrs. Smith purchases 100 shares of ABC at 35 and writes a 40 call at 5.50. If ABC stock increases to 60 and the call is exercised, Mrs. Smith has a

(A) $2,500 gain

(B) $3,050 loss

(C) $2,000 loss

(D) $1,050 gain

32. Which of the following are factors that affect the marketability of municipal GO bonds?

1. The quality
2. Call features
3. The issuer’s name
4. Credit enhancements

(A) I and II

(B) II and III

(C) I, II, and III

(D) I, II, III, and IV

33. If a customer wants to open a new account but refuses to provide some of the financial information requested by the member firm, which of the following statements is TRUE?

(A) The firm may open the account for the customer and make recommendations freely.

(B) The firm may open the account if it can determine from other sources that the customer has the financial means to handle the account.

(C) The firm may open the account and take unsolicited trades only.

(D) The firm may not accept any trades for the account until the information is received from the customer.

34. Mr. Mayvis has a margin account with a current market value of $20,250 and a debit balance of $3,000 with Regulation T at 50 percent. How much excess equity does the investor have in the account?

(A) $20,250

(B) $3,000

(C) $17,250

(D) $7,125

35. Which of the following is included in a preliminary prospectus?

1. The purpose for the funds being raised
2. Financial statements
3. A written statement in red citing that the prospectus may be amended and a final prospectus issued
4. The final offering price

(A) I and II

(B) I, II, and III

(C) II and IV

(D) I, II, III, and IV

36. Which of the following is true of accredited investors?

(A) They have had an annual income in excess of $200,000 for at least the last three years.

(B) They have had an annual income in excess of $100,000 for at least the last two years.

(C) They have a net worth of at least $1,000,000, excluding any equity they have in their primary residence.

(D) They have a net worth in excess of $200,000.

37. ADMM acts as a

(A) broker and dealer

(B) broker only

(C) dealer only

(D) neither a broker nor dealer

38. The maximum potential gain for a long combination is

(A) the premiums received

(B) the average of the call strike price and put strike price multiplied by 100 shares

(C) the difference between the call strike price and the put strike price multiplied by 100 shares

(D) unlimited

39. The SEC and FINRA require customer statements to be sent out for inactive accounts at least

(A) monthly

(B) quarterly

(C) semiannually

(D) annually

40. Which of the following securities is traded on an exchange and is an entity that makes mortgage loans to developers and has a portfolio of properties?

(A) DPPs

(B) ETNs

(C) Hybrid REITs

(D) Mutual funds

41. Which of the following are needed to open a margin account for a corporation?

1. Corporate charter and resolution
2. New account form
3. Hypothecation agreement
4. Credit agreement

(A) I and II

(B) I and IV

(C) III and IV

(D) I, II, III, and IV

42. The Municipal Bond Index is

(A) the average yield on 25 revenue bonds with 30-year maturities

(B) the average yield on 20 selected municipal bonds with 20-year maturities

(C) the average dollar price of 40 highly traded GO and revenue bonds

(D) the average yield on 11 selected municipal bonds with 20-year maturities

43. Which of the following oil and gas DPPs has the highest capital appreciation potential?

(A) Exploratory

(B) Developmental

(C) Income

(D) Combination

44. Martina Martin is new to investing but has determined that her primary objective is making sure that she is prepared for retirement. Which of the following is the MOST important factor for you to consider when helping her set up her investment portfolio?

(A) Age

(B) Net worth

(C) Education level

(D) Previous investment history

45. An investor buys 100 shares of common stock of T-Prompters, Inc. at $15 per share. Six months later, T-Prompter, Inc. is trading at 12.40–12.65, and the registered representative offers to purchase the 100 shares back from the investor for his own account at $15 per share. This procedure is

(A) permitted by FINRA rules

(B) permitted with the written permission of a manager of the firm

(C) prohibited because it violates the Code of Procedure

(D) prohibited because it is a guarantee against a loss

46. Which of the following is rated by most securities rating services?

(A) Market risk

(B) Investment risk

(C) Quantity

(D) Quality

47. Under federal law, stock CANNOT be tendered from which of the following accounts?

(A) Short margin accounts

(B) Margin accounts with no excess equity

(C) Cash accounts

(D) Long margin accounts

48. Which of the following items are required on an order ticket?

1. The time of the order
2. A description of the security (stocks, bonds, symbol, and so on)
3. Whether the registered rep has discretionary authority over the account
4. The registered rep’s identification number

(A) I, III, and IV

(B) I and III only

(C) I, II, and IV

(D) I, II, III, and IV

49. Which of the following are important factors when determining the markup or commission on a municipal bond trade?

1. The fact that you're entitled to make a profit
2. The difficulty of the trade
3. The market value of the securities at the time of the trade

(A) I and II

(B) I and III

(C) II and III

(D) I, II, and III

50. When compared to statutory voting, cumulative voting provides an advantage to

1. larger shareholders
2. mortgage bondholders
3. smaller shareholders
4. convertible bondholders

(A) I only

(B) II and IV

(C) III only

(D) II and III

51. Which of the following is NOT a benefit of investing in ADRs?

(A) The dividends are received in U.S. currency.

(B) The transactions are done in U.S. currency.

(C) ADRs are subject to antifraud rules.

(D) Currency risk is minimized.

52. CMOs are typically rated

(A) AAA

(B) AA

(C) BBB

(D) SP1

53. All of the following are types of state securities registration EXCEPT

(A) Notification

(B) Coordination

(C) Qualification

(D) Quantification

54. Keith Coalburner has written a letter of complaint regarding his recent purchase of municipal bonds to his broker-dealer. Upon receipt of the complaint, the broker-dealer must first

(A) immediately repurchase the securities at a price at or slightly above Keith’s purchase price

(B) guarantee to make the customer whole

(C) return any markup or commission charged

(D) accept the complaint and write down any action taken

55. An online site that provides detailed information to nonprofessional investors relating to municipal securities, including up-to-the-minute prices, is called

(A) The Blue List

(B) OPRA

(C) EMMA

(D) NASDAQ

56. Under which of the following circumstances would an investor face an unlimited maximum loss potential?

1. Short 2 DIM Nov 40 puts
2. Short 400 shares of DIM common stock
3. Short 6 DIM Nov 50 uncovered calls
4. Short 3 DIM Nov 50 covered calls

(A) I and II

(B) I and III

(C) II and III

(D) II and IV

57. A registered representative executes the following trades for a speculative investor:

• Buy 1 GHI May 30 call at 8
• Sell 1 GHI May 35 call at 3

Are these trades suitable for this investor?

(A) It is impossible to tell with the information given.

(B) Probably not, because the risk is not high enough for a speculative investor.

(C) Yes, buying and selling options are always appropriate for speculative investors.

(D) No, because it is impossible to make a profit with these positions.

58. Fred Freedom has held 100 shares of UPP stock for six months and decides to purchase a nine-month call on UPP. If the UPP call option expires and Fred decides to sell the UPP stock four months after the expiration of the call, what is Fred’s tax position?

(A) Short-term capital gain or long-term capital loss

(B) Long-term capital gain or short-term capital loss

(C) Long-term capital gain or long-term capital loss

(D) Short-term capital gain or short-term capital loss

59. John Dow and Jane Dough, who are engaged but unmarried, want to open a new account registered as joint tenants with rights of survivorship. Which of the following should occur?

(A) A principal of the firm should be notified immediately about the account registration so that a report can be filed with FINRA.

(B) The agent must refuse to open the account.

(C) The agent must notify a principal of the firm and a report must first be filed with the SEC.

(D) The agent may open the account, but should first discuss the rules of a JTWROS account with the unmarried couple.

60. Advertisements including recommendations must include all of the following EXCEPT

(A) If the firm is a market maker in the security being recommended

(B) If the firm acted as an underwriter in a recent public offering of the security being recommended

(C) If the firm participated in the selling group for a recent public offering of a security

(D) If partners of the firm hold options or warrants to buy the security being recommended

61. If a client has a margin account with $18,000 in securities and a debit balance of $7,000, and Regulation T is 50 percent, which of the following statements is FALSE?

(A) The account has a buying power of $4,000.

(B) If the client withdraws any excess equity, the debit balance decreases by the amount of the withdrawal.

(C) The account has excess equity of $2,000.

(D) The securities held in the account most likely increased in value.

62. Which type of margin account requires a minimum equity of $25,000?

(A) A portfolio margin account

(B) A short account

(C) A day-trading account

(D) A corporate account

63. Prior to buying or selling options, a customer must first receive a(n)

(A) ODD

(B) OCC

(C) margin agreement

(D) OPRA

64. Priority, precedence, and parity rules of bids and offers dictate trading activity on the

(A) OTC pink market

(B) fourth market

(C) New York Stock Exchange

(D) OTC market

65. Who maintains a fair and orderly market on the New York Stock Exchange trading floor?

(A) Floor brokers

(B) Two-dollar brokers

(C) Designated market makers

(D) Order book officials

66. Prior to a customer opening an options account, he or she must receive a(n)

(A) credit agreement

(B) OCC

(C) OAA

(D) ODD

67. The settlement date for municipal bonds is

(A) T+1

(B) T+2

(C) T+3

(D) Up to 5 business days at the purchaser’s discretion

68. Regulation SHO covers

(A) margin requirements for municipal and U.S. government securities

(B) the short sale of securities

(C) margin requirements for commodities

(D) portfolio margining rules

69. Which of the following is NOT an advantage for a customer adding REITs to her portfolio?

(A) Having a professionally managed portfolio of real estate assets

(B) Preferential dividend treatment

(C) Being able to use a REIT as a potential hedge against a negative price movement in other equity securities

(D) Liquidity

70. All of the following items would be found on the official statement of a municipal bond issue EXCEPT

(A) the markup

(B) a description of the issuer

(C) the coupon rate

(D) a legal opinion

71. Which of the following are true about the annuitization of a variable annuity?

1. The value of the annuity units is fixed.
2. The number of annuity units is fixed.
3. The value of the annuity units varies.
4. The number of annuity units varies.

(A) I and II

(B) II and III

(C) II and IV

(D) None of the above

72. Which of the following investments requires a registered representative to obtain written verification of an investor’s net worth?

(A) Hedge funds

(B) Variable annuities

(C) Direct participation programs

(D) Triple-tax-free municipal bonds

73. One of your clients is interested in purchasing a stock with a beta of 1.6. You can tell him that

(A) the stock is equally as volatile as the market

(B) the stock is less volatile than the market

(C) the stock is more volatile than the market

(D) cannot be determined

74. A head and shoulders bottom formation indicates

(A) the reversal of a bullish trend

(B) the reversal of a bearish trend

(C) that the stock is moving sideways

(D) that it might be a good time to sell short

75. Michael Moneybags purchased 1,000 shares of WOW common stock at $26 per share. Six months later, WOW is trading at $60 and Michael expects a slight decline in the market price for a short period of time. However, Michael has a lot of confidence that WOW is a great company and he remains bullish on WOW’s common stock overall. Providing Michael is correct in his assessment, which of the following positions would provide Michael a level of protection while still being able to generate additional income?

(A) Sell 1,000 WOW short and purchase 10 WOW Dec 65 calls for $300 each

(B) Buy 10 WOW straddles at 60

(C) Sell 10 WOW Dec 65 calls for $300 each and place a 1,000-share sell-stop order for WOW at 57

(D) Buy 10 WOW Oct 60 puts for $500 each

76. One of your customers purchases 100 shares of ARGH at 44.10 and 1 OEX Sep 360 put at 4.50. A few months later, ARGH is trading at 42.55 and the OEX index is trading at 349. If your customer closes the stock position and exercises his OEX put, what is his gain?

(A) $155

(B) $495

(C) $1,100

(D) $35,395

77. All-or-none orders must be

(A) executed in their entirety immediately or the order is cancelled

(B) executed in their entirety or the order is cancelled

(C) at least partially executed immediately or the order is cancelled

(D) at least partially executed or the order is cancelled

78. To process an ACAT, a brokerage firm must be a member of the

(A) FINRA

(B) NSCC

(C) SIPC

(D) DRS

79. All of the following increase SMA in a long account EXCEPT

1. selling securities from the account
2. the purchase of additional securities in the account
3. receipt of a cash dividend
4. a decrease in the market value of securities held in the account

(A) I and III

(B) II and IV

(C) I, III, and IV

(D) II, III, and IV

80. DEF Corporation issued stock to the public at $9 per share. If the manager’s fee was $0.15 per share, the takedown was $0.50 per share, and the concession was $0.30 per share, what was the spread?

(A) $0.45

(B) $0.65

(C) $0.80

(D) $0.95

81. Which of the following customer orders are discretionary?

1. "Buy 1,000 shares of a growth company"
2. "Buy or sell 500 shares of LMN"
3. "Buy or sell as many shares of TUV as you think I can handle"

(A) I and II

(B) II and III

(C) I and III

(D) I, II, and III

82. Which of the following is true regarding dark pools of liquidity?

1. They represent pools of institutional and large retail clients.
2. They reduce the amount of transparency of information relating to securities trading.
3. Firms trading for their own inventory may be included.
4. Trades executed by the pools are reported as exchange transactions.

(A) I and IV

(B) I, III, and IV

(C) I, II, and III

(D) II and III

83. Mutual funds must send financial statements to shareholders at least

(A) monthly

(B) bimonthly

(C) quarterly

(D) semiannually

84. Which of the following needs to be filled out on a new account form?

1. The customer's name and address
2. The customer's date of birth
3. The type of account
4. The customer's investment objectives

(A) I and II

(B) I, II, and III

(C) I, II, and IV

(D) I, II, III, and IV

85. What is the minimum amount of assets your client must have in order to establish a prime brokerage account?

(A) $100,000

(B) $500,000

(C) $1,000,000

(D) $5,000,000

86. Investing in a real-estate DPP program includes which of the following advantages?

1. Depreciation
2. Appreciation
3. Depletion
4. Cash flow

(A) I and II

(B) III and IV

(C) I, II, and IV

(D) I, II, III, and IV

87. A client owns a large amount of Treasury bonds and long-term investment grade corporate bonds. His main risk concern should be

(A) credit risk

(B) inflationary risk

(C) systematic risk

(D) timing risk

88. If LMN common stock has a $2.20 dividend, a current yield of 5.0%, a PE ratio of 6, and is trading at $44, its approximate earnings per share is

(A) $0.44

(B) $2.73

(C) $7.33

(D) $8.80

89. PE ratio equals

(A) the market price divided by the earnings per share

(B) annual dividends per common share divided by the market price

(C) annual dividends per common share divided by the earnings per share

(D) net income minus preferred dividends divided by the number of common shares outstanding

90. An investor owns the following investments:

• 50 New York 5 percent general obligation bonds maturing in 2030 and rated AA
• 50 Florida University 6.25 percent revenue bonds maturing in 2031 and rated AA
• 50 Nevada Turnpike 5.75 percent revenue bonds maturing in 2030 and rated AA

What type of diversification does this represent?

(A) Maturity

(B) Quality

(C) Quantity

(D) Geographical

91. A customer buys 1 DUD Jun 55 put at 4.50 when DUD is trading at 53.40. Just prior to expiration, the option is trading at 4.55 bid-4.65 asked. If the customer closes his position with a market order, what is the gain or loss?

(A) $5 gain

(B) $5 loss

(C) $160 gain

(D) $160 loss

92. An investor has shorted XYZ common stock at 55. XYZ common stock has recently dropped to 30 and the investor expects that the price will continue to decrease over the long term. If the investor would like to hedge against a possible increase in the price, the investor should

(A) buy an XYZ call

(B) sell an XYZ call

(C) buy an XYZ put

(D) buy an XYZ combination

93. Grant Goldbarr purchased 1 ABC 60 put at 3.50 and purchased 100 shares of ABC at 62. Six months later, with ABC trading at 64, Grant closes his put for 0.75 and sells his stock at the market price. What is Grant’s gain or loss as a result of these transactions?

(A) $75 loss

(B) $75 gain

(C) $275 loss

(D) $275 gain

94. If an investor buys a three-year LEAPS contract on issuance, which expires unexercised, what is the investor’s tax consequence at expiration?

(A) Short-term capital loss

(B) Long-term capital gain

(C) Long-term capital loss

(D) Short-term capital gain

95. A customer, without giving written authorization, may permit a registered representative to exercise his judgment as to

(A) whether to buy or sell

(B) the security

(C) the price and timing to enter the order

(D) the number of shares

96. Which of the following are nonexempt securities?

1. Municipal unit investment trust shares
2. U.S. government bond fund shares
3. Variable annuity accumulation units
4. Fixed annuities

(A) I and II

(B) III only

(C) III and IV

(D) I, II, and III

97. If Buddy Seagull has a limited amount of funds and wants to invest in the pharmaceutical industry but does not want to limit his investments to only one or two companies, which type of fund would be MOST suitable?

(A) A hedge fund

(B) A sector fund

(C) A balanced fund

(D) A money-market fund

98. What is the principal tax benefit for investing as a limited partner in an exploratory oil and gas drilling program?

(A) Tax credits

(B) Depreciation expenses

(C) Recourse loans

(D) Intangible drilling costs

99. One of your 60-year-old clients has a portfolio that consists of 60% invested in stocks, 30% in bonds, and 10% in cash equivalents. Using a standard strategic asset allocation model, he should:

(A) sell some of his bonds and purchase more stocks

(B) sell some of his stocks and purchase more bonds

(C) sell his cash equivalents and purchase more stocks and bonds

(D) cannot be determined with the information given

100. Ginny Goldbarr purchased 2 LMN 50 calls and paid a premium of 3 for each option. Ginny also purchased 2 LMN 50 puts and paid a premium of 2 for each option. At the time of purchase, LMN was trading at $50.25. Just prior to expiration, LMN was trading at $44.50, and Ginny decided to close her options for their intrinsic value. Excluding commission, Ginny had a

(A) $50 profit

(B) $50 loss

(C) $100 profit

(D) $100 loss

101. You have a new client who is in a high tax bracket and is looking for investments with a tax advantage. Which of the following securities would you LEAST likely recommend?

(A) Municipal bonds

(B) Collateralized mortgage obligations

(C) Retirement plans

(D) Direct participation programs

102. An investor wants to generate some income on a stock that she believes will remain at relatively the same price for the next year or so. Which of the following option positions would meet her goal?

(A) Buying a combination

(B) Writing a straddle

(C) Buying a call

(D) Buying a put

103. Adjustable-rate preferred stock has a dividend that adjusts according to

(A) prevailing interest rates

(B) the amount of dividend given to common stockholders

(C) the coupon rate on the issuer’s bonds

(D) the rate on CMOs

104. Regulation SHO covers the

(A) resale of restricted securities

(B) short sale of securities

(C) resale of ETFs

(D) margin requirement for listed options

105. Which of the following items are found on an indenture of a bond?

1. The maturity date
2. Callable or convertible features
3. The coupon rate
4. The name of the trustee

(A) II, III, and IV

(B) I, II, and III

(C) II and III

(D) I, II, III, and IV

106. As part of the USA Patriot Act of 2001, all financial institutions must maintain:

(A) Customer Identification Programs

(B) a fidelity bond

(C) SIPC coverage

(D) All of the above

107. Which of the following are important to investors evaluating direct participation programs?

1. The economic soundness of the program
2. The expertise of the general partner
3. The basic objectives of the program
4. The start-up costs

(A) I, II, and III

(B) I, II, and IV

(C) II, III, and IV

(D) I, II, III, and IV

108. What is the required beginning date (RBD) for traditional IRAs?

(A) The year after the investor reaches the age of 59½

(B) The year the investor turns the age of 70½

(C) April 1st of the year after the investor reaches the age of 70½

(D) April 15th of the year after the investor reaches the age of 70½

109. The initial maturity for Treasury Inflation Protected Securities is

(A) 2, 3, 5, 7, and 10 years

(B) 10 to 30 years

(C) 6 months to 30 years

(D) 5, 10, and 30 years

110. One of your clients is expecting to receive a lot of money over the next three years. Your client would like to shelter some of that money by investing in a DPP. Which of the following types of DPPs will help your client shelter the most money?

(A) Oil and gas income

(B) Oil and gas developmental

(C) Oil and gas combination

(D) Oil and gas wildcatting

111. Which of the following governmental bodies receives no revenue from ad-valorem taxes?

(A) County governments

(B) State governments

(C) School districts

(D) Local municipalities

112. According to MSRB rules, a customer confirmation must include

(A) the markup or markdown

(B) the location of the indenture

(C) the maturity date

(D) whether the trade was done on an agency or dealer basis

113. John believes that the market is about to become bearish and would like to be able to profit in the event that he is correct. Which of the following investments would meet John’s needs?

1. Inverse ETFs
2. Selling SPX calls
3. High-yield bond funds
4. Selling OEX puts

(A) I and II

(B) II and IV

(C) I, II, and III

(D) I, II, and IV

114. Ferret Enterprises pays a quarterly dividend of $0.25 per share and has an EPS of $2.50. What is the dividend payout ratio?

(A) 10 percent

(B) 40 percent

(C) 57 percent

(D) 100 percent

115. Gerry Goldbar purchases a new OID municipal zero-coupon for 80. If Gerry holds the bond to maturity, what is his tax consequence?

(A) $0

(B) $200 ordinary income over the time the bond is held to maturity

(C) $200 capital gain

(D) None of the above

116. Which of the following securities are exempt from the Trust Indenture Act of 1939?

1. Treasury bonds
2. General obligation bonds
3. Mortgage bonds
4. Revenue bonds

(A) I, II, and III

(B) I, II, and IV

(C) I and III

(D) II and IV

117. Which of the following disputes must be resolved using the Code of Arbitration?

1. A dispute between a member of FINRA and a registered rep
2. A dispute between a member of FINRA and a customer
3. A dispute between two members of FINRA
4. A dispute between a bank and a member of FINRA

(A) IV only

(B) II and IV

(C) I and III

(D) I, III, and IV

118. Duke Wallwalker purchased an LTSBR Corporation convertible bond at 95 on January 20, 2018. The bond is convertible at $40, and the investor converts his bond into stock on January 21, 2021. If the bond is trading at 104 and the common stock is trading at $42, for tax purposes, these transactions will result in

(A) a $10 gain

(B) a $10 loss

(C) a $90 gain

(D) neither a gain nor a loss

119. XYZ is currently trading at 24.10–24.25. A designated market maker in XYZ could enter a bid at which of the following prices?

(A) 24.10

(B) 24.12

(C) 24.25

(D) 24.27

120. RANs, BANs, TANs, and CLNs are issued by municipalities seeking

(A) to insure their municipal securities

(B) the approval of the SEC

(C) long-term financing

(D) short-term financing

121. If an official statement has a dated date of May 1st, but the first coupon payment is set at December 1st, it means that the first payment is a

(A) long coupon

(B) mistake printed on the official statement

(C) short coupon

(D) normal payment for a seven-month bond

122. Which of the following statements regarding municipal revenue bonds is NOT true?

(A) Revenue bonds are not subject to a debt ceiling.

(B) Revenue bonds may be issued by interstate authorities.

(C) The maturity date of the issue will usually exceed the useful life of the facility backing the bonds.

(D) Debt service is paid from revenue received from the facility backing the bonds.

123. One of your customers feels she was overcharged for a trade and sends your firm a written complaint. What must happen with regards to the complaint?

(A) The complaint must be forwarded to the SEC.

(B) The complaint must be handled by a principal.

(C) The overcharged amount in dispute must be credited to the customer's account until a decision has been reached.

(D) The complaint must be forwarded to the arbitration committee.

124. All of the following may be sources of revenue for a revenue bond EXCEPT

(A) property taxes

(B) user fees

(C) tolls

(D) airports

125. One of your clients would like to add some municipal bonds to his portfolio. Since your client has enough cash to diversify, you should let him know that some of the ways he could diversify would be

1. geographically
2. par value of certificates
3. type of bonds
4. ratings

(A) II, III, and IV

(B) I, III, and IV

(C) I and II

(D) II and IV