S7 Final Review QUESTIONS WITH
ANSWERS
Dividends on common stock - CORRECT ANSWERS
✔✔Paid at discretion of the board of directors and may be
paid even when there are no earnings
Trading and "INTEREST" - CORRECT ANSWERS
✔✔means, trading with accrued interest
zero coupon bonds have NO accrued interst
Time extension - CORRECT ANSWERS ✔✔may be
requested from the BD's designated examining authority
DPPs have what kind of losses? - CORRECT ANSWERS
✔✔Passive losses, which can only be used to offset
passive income (i.e., income from limited partners)
Does Rule 144 pertain to primary offerings? - CORRECT
ANSWERS ✔✔No, it affects secondary market
transactions in restricted or control securities. Reg A, D,
Rule 147 are all exempt when it comes to primary
offerings
,Build America Bonds (BABs) - CORRECT ANSWERS
✔✔1) direct payment BABs provide municipal issuer with
payments from US Treasury 2) tax credit or issuer BABs
provide municipal bondholder with fed. income tax credit
Are BABs taxable? - CORRECT ANSWERS ✔✔Yes, they
are taxable municipal securities
Why were BABs created? - CORRECT ANSWERS ✔✔To
assist in reducing costs to issuing municipalities and to
stimulate economy
CMOs - CORRECT ANSWERS ✔✔generally backed by
pass-through securities from gov't agencies and gov't
sponsored corps; but don't carry any type of guarantee
Z-tranche of CMO - CORRECT ANSWERS ✔✔carries the
highest prepayment risk
If a municipal is trading flat... - CORRECT ANSWERS
✔✔it is trading without accrued interest
A dealer that quotes a concession of half to another
dealer - CORRECT ANSWERS ✔✔means: $5 per $1,000
of par
,When customer is opening new options account... -
CORRECT ANSWERS ✔✔Client must have current OCC
disclosure document, which is verified by client's
signature on options agreement form, which must be
signed nad returned within 15 days of account approval
OCC approval - CORRECT ANSWERS ✔✔is NOT required,
nor do they verify any info given by client
Mutual funds - CORRECT ANSWERS ✔✔no maturity date
--> has interest rate risk
At maturity, mutual fund bonds - CORRECT ANSWERS
✔✔returns the principal, regardless of what current
market interest rates are
Formula to calculate value of one right before the ex-date
- CORRECT ANSWERS ✔✔(CMV - subscription price) / (#
rights to purchase one share + 1)
UIT - CORRECT ANSWERS ✔✔has one-time offering of
securities; no public secondary trading
, Is a prospectus required for a UIT? - CORRECT
ANSWERS ✔✔As a public offering of a new security,
prospectus is required
Do closed-end funds require a prospectus? - CORRECT
ANSWERS ✔✔Only for initial offering - once completed,
no prospectus is necessary
Do munis and treasury securities require a prospectus? -
CORRECT ANSWERS ✔✔No, they are both exempt
Customer is long 200 shares of MTN at 30 and 400 shares
of DWQ at 20 in a margin account. If DR is $8,000, and
customer sells 200 DWQ shares of $4,000, the credit to
SMA is: - CORRECT ANSWERS ✔✔$2,000
Now, account is restricted ($6,000 equity divided by
$14,000 = 42.8% equity). When securities are sold in a
restricted account, 50% of proceeds are released to SMA.
Because $4,000 worth of securities were sold, $2,000
(50%) is credited to SMA.
Trading in penny stocks... - CORRECT ANSWERS ✔✔May
not begin in account until at least 2 business days after
sending the statement
ANSWERS
Dividends on common stock - CORRECT ANSWERS
✔✔Paid at discretion of the board of directors and may be
paid even when there are no earnings
Trading and "INTEREST" - CORRECT ANSWERS
✔✔means, trading with accrued interest
zero coupon bonds have NO accrued interst
Time extension - CORRECT ANSWERS ✔✔may be
requested from the BD's designated examining authority
DPPs have what kind of losses? - CORRECT ANSWERS
✔✔Passive losses, which can only be used to offset
passive income (i.e., income from limited partners)
Does Rule 144 pertain to primary offerings? - CORRECT
ANSWERS ✔✔No, it affects secondary market
transactions in restricted or control securities. Reg A, D,
Rule 147 are all exempt when it comes to primary
offerings
,Build America Bonds (BABs) - CORRECT ANSWERS
✔✔1) direct payment BABs provide municipal issuer with
payments from US Treasury 2) tax credit or issuer BABs
provide municipal bondholder with fed. income tax credit
Are BABs taxable? - CORRECT ANSWERS ✔✔Yes, they
are taxable municipal securities
Why were BABs created? - CORRECT ANSWERS ✔✔To
assist in reducing costs to issuing municipalities and to
stimulate economy
CMOs - CORRECT ANSWERS ✔✔generally backed by
pass-through securities from gov't agencies and gov't
sponsored corps; but don't carry any type of guarantee
Z-tranche of CMO - CORRECT ANSWERS ✔✔carries the
highest prepayment risk
If a municipal is trading flat... - CORRECT ANSWERS
✔✔it is trading without accrued interest
A dealer that quotes a concession of half to another
dealer - CORRECT ANSWERS ✔✔means: $5 per $1,000
of par
,When customer is opening new options account... -
CORRECT ANSWERS ✔✔Client must have current OCC
disclosure document, which is verified by client's
signature on options agreement form, which must be
signed nad returned within 15 days of account approval
OCC approval - CORRECT ANSWERS ✔✔is NOT required,
nor do they verify any info given by client
Mutual funds - CORRECT ANSWERS ✔✔no maturity date
--> has interest rate risk
At maturity, mutual fund bonds - CORRECT ANSWERS
✔✔returns the principal, regardless of what current
market interest rates are
Formula to calculate value of one right before the ex-date
- CORRECT ANSWERS ✔✔(CMV - subscription price) / (#
rights to purchase one share + 1)
UIT - CORRECT ANSWERS ✔✔has one-time offering of
securities; no public secondary trading
, Is a prospectus required for a UIT? - CORRECT
ANSWERS ✔✔As a public offering of a new security,
prospectus is required
Do closed-end funds require a prospectus? - CORRECT
ANSWERS ✔✔Only for initial offering - once completed,
no prospectus is necessary
Do munis and treasury securities require a prospectus? -
CORRECT ANSWERS ✔✔No, they are both exempt
Customer is long 200 shares of MTN at 30 and 400 shares
of DWQ at 20 in a margin account. If DR is $8,000, and
customer sells 200 DWQ shares of $4,000, the credit to
SMA is: - CORRECT ANSWERS ✔✔$2,000
Now, account is restricted ($6,000 equity divided by
$14,000 = 42.8% equity). When securities are sold in a
restricted account, 50% of proceeds are released to SMA.
Because $4,000 worth of securities were sold, $2,000
(50%) is credited to SMA.
Trading in penny stocks... - CORRECT ANSWERS ✔✔May
not begin in account until at least 2 business days after
sending the statement
