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A security that pays a fixed amount on a quarterly basis, and also allows the holder to profit if the common stock rises, is known as a:

Convertible preferred stock

Convertible bond

Warrant

Right

Which of the following actions should be taken if a registered representative (RR) receives a written complaint from a customer?

The RR should respond to the complaint within 10 business days.

The RR should forward the complaint to her principal.

FINRA should receive a copy of the complaint within 10 business days.

The firm should immediately respond to the customer.

A mutual fund charges a maximum front-end load of 5.50% for purchases of less than $100,000 and 3.50% for purchases of $100,000 but less than $250,000. An individual invests $75,000 in the fund and signs a letter of intent. Prior to the expiration date of the letter, the individual invests another $75,000. What is the total sales charge the individual should pay?

$7,250

$6,750

$5,250

$8,250

The current yield on a $1,000 par value 5% bond selling at $800 maturing in 10 years is:

5.00%

5.60%

6.25%

8.50%

In a limited partnership, a general partner's minimum participation in profits and losses is:

10%

15%

The interest rate that fluctuates the most is the:

Prime rate

Broker loan rate

Discount rate

Federal funds rate

A U.S. Treasury bill is sold in the secondary market on Thursday, March 14. It has a regular-way settlement of:

Monday, March 18

Friday, March 15

Wednesday, March 20

Thursday, March 14

Which of the following statements is NOT TRUE for a bond trading at a premium?

The bond will trade with the current yield lower than the nominal yield.

The bond will trade at a basis below its coupon rate.

The bond will have a current yield that is higher than the yield basis.

The basis and coupon will be identical.

A registered person is asked by the sponsor of a limited partnership to sell partnership units to his clients. Since the partnership is not being sold through the representative's broker-dealer, the sponsor will compensate the representative directly. For this situation, which of the following statements is TRUE?

A registered person cannot participate in this type of transaction.

For the person to participate, the broker-dealer must give written approval for the transaction and must record the transaction on its books

The representative may participate if the sponsor is associated with a FINRA member.

The representative may participate if the partnership is being sold as a private placement.

Three-month and six-month Treasury bills are auctioned by the Federal Reserve Board:

Daily

Weekly

Monthly

Annually

A broker-dealer is underwriting an initial public offering (IPO) for a company that will be exchange-listed. The broker-dealer continues to deliver prospectuses:

Only on purchases made, at the public offering price

For 25 days after the deal has closed

For 40 days after the deal has closed

For 90 days after the deal has closed

Why do no-load mutual funds have lower expense ratios than mutual funds with a sales load?

No-load funds cannot assess 12b-1 fees.

Fees for managing no-load funds are always lower when compared to mutual funds with sales loads.

Sales loads on mutual funds will increase the annual expense ratio of the mutual fund.

No-load funds cannot assess a 12b-1 fee that exceeds 25 basis points.

If interest rates decline, which of the following securities is likely to have the greatest increase in market value?

Short-term bonds

Intermediate-term bonds

Long-term bonds

All bonds will experience the same change in market value

If an investor owns Treasury notes, she receives payments:

At maturity only

Semiannually only

Semiannually and at maturity

Monthly and at maturity

Which of the following is NOT included in a list of institutional investors?

A hedge fund

A public pension plan

An insurance company

An accredited investor

Which of the following bonds will provide safety of principal as well as capital appreciation?

A convertible bond

A U.S. Government bond

A municipal revenue bond

A municipal general obligation (GO) bond

If an investor inherits mutual fund shares, what's her cost basis?

The NAV of the shares on the date of the owner's death

The NAV as calculated 90 days after the owner's death

The same cost basis as the deceased owner's

The same cost basis as the deceased owner's plus any capital gains distributions

The issuer of a bond has the ability to redeem the entire issue prior to the final maturity date. Which yield would be MOST relevant?

Yield-to-maturity

Yield-to-call

Current yield

Nominal yield

In a 529 plan, can an individual be both the donor and the beneficiary?

Yes, if the person is of legal age.

Yes, if the withdrawals will be used for graduate school.

Yes, if the person has retired.

Under no circumstances.

An IRA that allows for non-deductible contributions, limits the amount able to be contributed to the lesser of 100% of earned income or $6,000 per year, and allows for qualified distributions to be taken tax-free after age of 59 1/2 is a/an:

SEP-IRA

Traditional IRA

Education IRA

Roth IRA

An Operations Professional is notified by a registered representative (RR) that he has received a written complaint from a customer. The RR informs the Operations Professional that the issue is now rectified and no further action is required. What is the MOST appropriate action for the Operations Professional to take?

Consider the complaint resolved

Consider the complaint resolved but notify the principal of the complaint

Notify the principal of the complaint

Call the customer to see if the dispute has been resolved

For the buyer of an option, the premium paid is considered the:

Leveraged price

Maximum risk

Maximum reward

Breakeven point

A corporation has a 7% cumulative preferred stock issue outstanding. The company paid a $5 dividend three years ago, $6 two years ago, and $7 last year. If the company wants to pay a common stock dividend in the current year, the cumulative preferred stockholders must first receive a dividend of:

$17

$10

If an investor's portfolio is significantly weighted with mortgage-backed securities, she is MOST concerned with:

Credit risk

Political risk

Legislative risk

Prepayment risk

Which of the following is NOT a characteristic of preferred stock?

It has a fixed dividend

The board of directors must declare the dividends

It has a dividend that is not guaranteed

It carries voting rights

A corporation declares a 5% stock dividend that's payable on Thursday, October 18. If the record date is Wednesday, October 3, the ex-date for this distribution is:

Monday, October 1

Tuesday, October 2

Wednesday, October 17

Friday, October 19

The federal securities regulation that requires disclosure by issuers offering securities to the public is:

The Investment Advisers Act of 1940

The Securities Investor Protection Act of 1970

The Securities Exchange Act of 1934

The Securities Act of 1933

A person has had a brokerage account with an online securities trading firm, but has just been hired by a broker-dealer. Which of the following statements is TRUE?

The person is not permitted to maintain the account.

The person is only permitted to maintain the account if a principal of the employing firm provides written approval for each order prior to the order being entered.

The person is permitted to maintain the account if his employer provides written consent within three months of being hired.

The person is permitted to maintain the account if his employer provides written consent within 30 days of being hired.

A client has been watching a thinly traded stock and has noticed that it has not had any trading activity today. What type of risk is the MOST significant for this type of investment?

Business risk

Liquidity risk

Inflation risk

Market risk

A person pleaded guilty to a charge of counterfeiting and bribery five years ago. He has now been released from prison and is applying for an investment banking position with your firm. Which of the following statements is TRUE regarding his eligibility for current employment in the securities industry?

If the offenses are not related to securities, the criminal record is of no significance.

He's subject to statutory disqualification and is not currently eligible to be hired.

Pleading guilty does not constitute a conviction; therefore, this person is eligible for employment.

The branch manager may use her own judgment to determine the applicant's status.

A limited partner would be in jeopardy of losing her limited liability if the partner:

Received a portion of the project's income and deductions

Assisted in the decision of which properties to acquire

Insisted on examining the partnership's financial records

Made a loan to the partnership

When selling a security for a customer, all of the following items MUST be included on the sell order ticket, EXCEPT:

The number of shares or par value

The location of the security

The customer's Social Security number

If the account is discretionary, whether discretion was exercised

When can a European style option be exercised?

At any time up until the expiration date

Only on the expiration date

During the week before the expiration date

On the day after the expiration date

Within a brokerage firm, a registered representative solicits customers to purchase securities, another person works in the firm's cashier's department as a clerk, a managing director supervises the research department, and a consultant has been brought in to work on an accounting project. Which of these persons is NOT required to be fingerprinted?

The registered representative

The clerk

The consultant

The managing director

Which of the following is the BEST description of inflation?

A general increase in prices.

An increase in the stock market.

A decrease in interest rates.

The point at which the economy experiences a downturn.

Which of the following statements is TRUE regarding the purchaser of a call option?

The yield on the purchaser's portfolio will increase by purchasing the option.

If the underlying stock declines, the purchaser's maximum loss is limited.

The purchaser will benefit if the underlying stock declines.

The purchaser will exercise the option if the underlying stock declines.

A brokerage firm creates an in-house, non-cash incentive program. This is permitted if it's tied to the RR's sale of which of the following products?

All securities products that are sold by the RR

Equity securities that are sold by the RR

Mutual fund shares that are sold by the RR

Only the securities that are created by the RR's employing firm

The U.S. Government agency that is responsible for regulating the process by which issuers raise capital is:

The Federal Deposit Insurance Corporation (FDIC)

The Securities Exchange Commission (SEC)

The Internal Revenue Service (IRS)

The Financial Industry Regulatory Authority (FINRA)

In reviewing prices for a mutual fund, an investor notices that the Beacon Fund has two listings, one for Class A shares and the other for Class B shares. The distinction between the two classes of shares would most likely be:

Class A shares are oriented toward short-term trading, while Class B shares have a long-term perspective

Class A shares should be purchased by income-oriented investors while Class B shares are for those seeking capital appreciation

Class A shares can be purchased directly from the fund, while Class B shares are offered through broker-dealers

Class A shares have a front-end sales charge, while Class B shares have a contingent deferred sales charge

Which of the following statements describes the greatest risk associated with mortgage-backed securities?

Borrowers might default on their mortgage payments

The market for mortgage-backed securities is illiquid

The market price of the bonds might fall due to a rating downgrade

Falling interest rates might accelerate early repayment of principal

The payout on a variable annuity is based on a:

Fixed number of accumulation units with a fluctuating value per unit

Fixed number of annuity units with a fluctuating value per unit

Fixed value per unit with a fluctuating number of annuity units

Fixed number of annuity units with a fixed value per unit

Under what circumstances may a husband and wife both be custodians in one minor's account?

Under no circumstances

If the minor gives written consent

If the husband and the wife both agree

If the account has a market value of at least $15,000

All of the following are features of a Roth IRA, EXCEPT:

Contributions may be deductible

Qualified withdrawals at retirement are tax-free

The maximum annual contribution is the lesser of $6,000 or 100% of earned income

A five-year holding period must be satisfied for a distribution to be qualified

An uncle would like to invest for his nephew's college education. Which of the following factors is a benefit of a 529 plan?

Uniformity of state taxation

Pretax contributions

Change of beneficiaries allowed

No limits on contributions

A registered person has received a gift that's valued at $150 from the FINRA member firm through which her firm clears trades. This gift is considered:

Excessive

Acceptable, but only if it's documented by the gifting firm

Acceptable, but only if it's documented by the receiving firm

Acceptable

An individual was convicted of insider trading four years ago and served out her sentence in federal prison. If she is seeking a position as a registered representative, she should be informed that:

She can be hired, but won't be permitted to talk to clients

She cannot be hired as an registered representative for six years

She can only provide advice on securities distributed through private placements since the securities are exempt securities

Any sales she executes must be preapproved in writing by a principal

Understanding a customer's investment profile is important when a registered person is determining:

The amount of commission to charge a customer

Whether an investment is suitable for a customer

Whether to charge the customer a fee or a markup

The type of disclosure document to send to the customer

Which of the following is NOT a type of unsystematic risk?

Political risk

Business risk

Credit risk

Market risk

A brokerage firm will generally distribute which of the following to employees of the firm?

The restricted list

The watch list

A list of the mutual funds it recommends to customers

A list of the stocks in which it makes a market

Which of the following activities is NOT performed by a transfer agent?

Handling lost, destroyed, or stolen certificates

Acting as proxy agent

Maintaining the issuer's ownership register for each issuance of securities

Acting as the company’s paying agent for interest payments on bonds and for cash or stock dividends on equities

Which of the following statements is NOT TRUE regarding the Uniform Gifts to Minors Act?

Only one custodian is allowed for each account

The minor is responsible for all taxes due on dividends and interest received from securities held in the account

Only an adult may be a custodian

Securities must be held in the name of the brokerage firm

For how many successive quarters must gross domestic product (GDP) fall for the economy to be considered in recession?

One quarter

Three quarters

Two quarters

Four quarters

If mutual fund has a breakpoint at $100,000, which of the following purchases is a breakpoint sale?

An unsolicited purchase at $99,000

An unsolicited purchase at $101,000

A solicited purchase at $99,000

A solicited purchase at $101,000

Which of the following securities is exempt from state taxes?

Corporate stock

Convertible bonds

Federal National Mortgage Association (FNMA) bonds

Treasury notes

Which of the following is not subject to the Investment Company Act of 1940?

Hedge funds

Inverse ETFs

Mutual funds

Leveraged ETFs

A type of offering in which the issuing corporation is assured of receiving the full amount of the offering and anything unsold is retained by the underwriter is a:

Firm commitment

Best efforts

All-or-none

Contingency offering

Regarding communications, which of the following statements is TRUE concerning the responsibilities of a principal of a broker-dealer?

A principal must approve retail communications prior to use.

A principal must approve all institutional communications prior to use.

A principal must approve all correspondence prior to use.

A principal must approve all retail communications and correspondence prior to use.

May a brokerage firm place a temporary hold on the transfer of securities?

Yes, for the account of any investor.

Yes, for the account of a senior investor.

No, since this is beyond the scope of SRO rules.

Yes, if the customer has a margin account.

Blue Sky laws are established under which of the following?

The Securities Act of 1933

The Securities Exchange Act of 1934

The Uniform Securities Act

The Code of Procedure

An individual wants a real estate investment that offers tax benefits and provides the ability to share directly in the earnings of the business. Which of the following BEST meets those objectives?

ETN

REIT

ETF

DPP

An employee at your firm is scheduled to meet for dinner with an employee of another firm to discuss a joint business venture. Your firm's employee is unable to attend and agrees to pay for dinner without attending. This would be considered:

A gift

A legitimate business expense

Compensation

Normal business practice

Municipal bonds that are backed by the taxing power and the full faith and credit of the issuer are referred to as:

Revenue bonds

General obligation bonds

Moral obligation bonds

Special assessment bonds

May a brokerage firm place a temporary hold on a securities transaction?

Yes, for the account of any investor.

No, temporary holds may only be placed on disbursements or transfers of funds and securities.

Yes, for the account of a specified adult.

Yes, if the customer has a margin account.

The U.S. Department of the Treasury is responsible for:

Fighting stagnation

Fiscal policy

Fighting inflation

Collecting taxes

The net asset value (NAV) of an open-end investment company is $22.20 and its sales charge is 8%. What is the public offering price?

$20.42

$22.20

$23.98

$24.13

The fluctuations in the value of a variable annuity will correspond with the fluctuations in the:

Dow Jones Industrial Average

Value of the index or average on which the payout is based

Value of the securities held in the separate account of the annuity

Cost of living index

Which of the following statements is NOT TRUE regarding a company's Form 10-K?

It contains financial information about the company.

It's an annual filing.

A broker-dealer must promptly forward it to its customers.

It allows shareholders to vote without attending the annual meeting.

An investor has a portfolio of bonds that yields 6%. Interest rates have been falling and most of the bonds in the portfolio are due to mature which will force the investor to seek new bonds at lower yields. This investor is experiencing:

Opportunity risk

Reinvestment risk

Prepayment risk

Credit risk

A reverse repurchase agreement is sometimes referred to as:

Federal funds

Arbitrage

A matched sale

A treasury sale

Which characteristic is shared by both fixed and variable annuities?

Tax-deferral of earnings

Tax-deductible contributions

A variable rate of return

A fixed rate of return

Which of the following activities is acceptable during the cooling-off period?

Accepting orders

Soliciting indications of interest

Promising an allocation

Accepting a deposit

Which of the following investors typically are entitled to vote?

Common stockholders only

Common and preferred stockholders only

All stockholders and convertible bondholders

All stockholders and senior debt holders

Funds collected from 12b-1 fees cannot be used to pay for which of the following fund expenses?

Sales concessions paid to registered representatives

Printing the fund's prospectus

Commissions paid for executing trades in the fund's portfolio

Costs associated with creating the fund's website

ABC Brokerage, a broker-dealer, purchases 600 shares of stock from a market maker to fill a customer's buy order. ABC has acted as a(n):

Dealer

Designated market maker

Agent

Underwriter

Industrial production is considered what type of economic indicator?

Leading

Lagging

Cyclical

Coincident

Which of the following statements is NOT TRUE concerning the opening an account for a new client?

The RR may NOT open the account using a P.O. Box as an address.

The RR may send mail to a P.O. box.

The client must sign the new account form.

The RR must make an effort to obtain the client's tax ID number, such as a Social Security number.

Which of the following is the rate that commercial banks charge on loans to broker-dealers for margin purposes?

Prime rate

Discount rate

Federal funds rate

Call rate

The main difference between a registered exchange-traded REIT and a registered nontraded REIT is:

The type of assets in which they are permitted to invest

The types of disclosures they are required to make to investors

The amount of liquidity each of the securities has

The tax treatment of each of the securities

A close friend of an MFP is running for election as treasurer in the MFP's city. If the MFP contributes $450 to his friend's election campaign, for how long is the MFP's broker-dealer restricted from engaging in negotiated underwritings with the city?

Two years

Three years

Five years

There is no restriction

According to FINRA's rules regarding communication with the public, which communication is subject to principal approval and filing with FINRA?

An e-mail that a member firm is distributing to 10 prospective retail investors.

An e-mail that a member firm is distributing to 10 prospective retail investors and 10 existing retail investors.

An e-mail that a member firm is distributing to 30 investment advisers in hopes of generating institutional business.

An independently prepared reprint of an article regarding mutual funds that a member firm is distributing to 30 existing retail investors

A change in which of the following choices does NOT require the broker-dealer to send a notice to the customer?

Investment objectives

Net worth

Name

Address

In what type of offering are all of the proceeds directed to the issuer?

Primary

Split

Secondary

Guaranteed

The relative of an 85-year-old account holder contacts the registered representative of the account and requests that funds be transferred to her account which is also held at the same firm. If the RR suspects financial exploitation, which of the following is the BEST course of action?

Process the transaction since both accounts are held at the same firm.

Attempt to resolve the matter with the customer prior to placing a temporary hold.

Immediately place a temporary hold on the account.

Contact the attorney for the 85-year-old account holder.

A project financed through revenue bonds is experiencing difficulty in that revenues are not sufficient to meet debt service payments. If, through legislative approval, the state pays interest and principal in a timely manner, the issue is MOST LIKELY:

Double-barreled bonds

Moral obligation bonds

Bond anticipation notes

Limited tax bonds

If a firm places a temporary hold on a customer’s account:

It applies to either the entire account or specific disbursements

It only applies to specific transactions

It only applies to specific disbursements

It only applies to a specific transfer of securities

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