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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Seeks Business for the Broker-Dealer from Customers and Potential Customers | 9% | - Customer acquisition and prospecting
|
| Topic 2: Obtains and Verifies Customers' Purchase and Sale Instructions and Agreements; Processes, Completes and Confirms Transactions | 7% | - Trade execution and settlement
|
| Topic 3: Provides Customers with Information About Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records | 73% | - Customer recommendations and transactions
|
| Topic 4: Opens Accounts After Obtaining and Evaluating Customers' Financial Profile and Investment Objectives | 11% | - Customer accounts and documentation
|
1. Bubba buys a bond issued at par with a 5% coupon that is convertible into common stock at $40. The
bond increases in value by 20 points. What is the conversion parity of the stock?
A) $50
B) $40
C) $25
D) $48
2. Which of the following is available both to owners of stock and owners of limited partnership
participations?
A) deductions for losses in excess of income earned
B) a share in the profits from earnings
C) deduction of business expenses from income
D) tax credits
3. The FINRA markup policy requires that over-the-counter transactions with a customer be at:
A) prices reasonably related to the dealer's cost
B) prices reasonably related to the current market price of the security
C) a markup not to exceed 5% of the current offering price
D) a markup based on previous activity in the customer's account
4. Common stocks for which of the following industries are most likely to decline in value when interest rates
rise?
A) airlines
B) public utility companies
C) stock brokers
D) automobile manufacturers
5. In June, Bubba bought 100 shares of XYZ at $35. In November, he bought a listed put in XYZ with a $35
strike price and a July expiration for a premium of $600. In April, Bubba exercises the put option and uses
his stock for delivery. What is his resulting tax consequence?
A) a $600 capital loss
B) this is a wash sale and cannot be included in the investor's tax calculations
C) neither profit nor loss
D) cannot be determined without knowing the market price of XYZ upon exercise
Solutions:
| Question # 1 Answer: D | Question # 2 Answer: B | Question # 3 Answer: B | Question # 4 Answer: B | Question # 5 Answer: A |
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