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Question 1 of 10
1. Question
How shall the broker-dealer notify the Commission and the Designated Examining Authorities regarding the delayed deposit of the market maker or the specialist?
Correct
The notice on the failed deposit of the market maker or specialist within the prescribed period shall be submitted by the telegraph to the Commission and the Designated Examining Authority. The Commission and the Designated Examining Authority shall receive the notice not later than the close of business on the day the call is not met. It must not cause any delays for it is a requirement under the SEA Rule 15c3-1.
Incorrect
The notice on the failed deposit of the market maker or specialist within the prescribed period shall be submitted by the telegraph to the Commission and the Designated Examining Authority. The Commission and the Designated Examining Authority shall receive the notice not later than the close of business on the day the call is not met. It must not cause any delays for it is a requirement under the SEA Rule 15c3-1.
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Question 2 of 10
2. Question
Which of the following securities does not apply the minimum capital requirements of market makers?
I. Corporate bonds
II. Treasury bills
III. Loans receivable
IV. Municipal bondsCorrect
For corporate bonds, treasury bills, and municipal bonds, minimum capital requirements for market makers would not be applied. This exception is stated at SEA Rule 15c3-1. Any kind of bonds or debt securities is not included in requiring a minimum net capital for market makers.
Incorrect
For corporate bonds, treasury bills, and municipal bonds, minimum capital requirements for market makers would not be applied. This exception is stated at SEA Rule 15c3-1. Any kind of bonds or debt securities is not included in requiring a minimum net capital for market makers.
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Question 3 of 10
3. Question
How shall the average number of markets be computed?
I. Add the total number of markets made each day with prices over $5 divided by the total number of business days for the 30 calendar year period.
II. Add the total number of markets made each day with prices less than $5 divided by the total number of business days for the 30 calendar year period.
III. Add the total number of markets made each day with prices over $5 multiplied by the total number of business days for the 30 calendar year period.
IV. Add the total number of markets made each day with prices less than $5 multiplied by the total number of business days for the 30 calendar year period.Correct
In computing the average number of markets, the total number of markets each day over $5 per share shall be divided by the total number of business days for the same 30 day period. This computation is also applicable for shares of less than or equal to $5. An average number of markets is based on markets made over the 30 day period as mandated in SEA Rule 15c3-1.
Incorrect
In computing the average number of markets, the total number of markets each day over $5 per share shall be divided by the total number of business days for the same 30 day period. This computation is also applicable for shares of less than or equal to $5. An average number of markets is based on markets made over the 30 day period as mandated in SEA Rule 15c3-1.
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Question 4 of 10
4. Question
Which of the following is not considered debt security?
Correct
Debt securities are, but not limited to, banknotes, bonds, and debentures. Call and put options are derivates rather than debt securities. Other derivatives include forwards, futures, and swaps. Equity securities, on the other hand, are common and preferred stocks of an entity, either a company, partnership, or trust.
Incorrect
Debt securities are, but not limited to, banknotes, bonds, and debentures. Call and put options are derivates rather than debt securities. Other derivatives include forwards, futures, and swaps. Equity securities, on the other hand, are common and preferred stocks of an entity, either a company, partnership, or trust.
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Question 5 of 10
5. Question
Which of the following is correct regarding bonds?
I. It is a fixed income instrument made by an investor to a borrower that represents a loan.
II. It may be considered as an I.O.U between the borrower and the lender.
III. It is used by companies, municipalities, and governments in their finance project and operations.
IV. It is the stake of ownership in a company.Correct
A bond is a fixed income instrument that represents a loan. It is also called an I.O.U between the borrower and the lender. This is used by companies, municipalities, states, and sovereign governments regarding their projects and operations. The stake of ownership in a company is stock rather than bonds because bonds are debts of the company and stocks are owned by a company.
Incorrect
A bond is a fixed income instrument that represents a loan. It is also called an I.O.U between the borrower and the lender. This is used by companies, municipalities, states, and sovereign governments regarding their projects and operations. The stake of ownership in a company is stock rather than bonds because bonds are debts of the company and stocks are owned by a company.
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Question 6 of 10
6. Question
When do bonds trade at a premium?
Correct
When the coupon interest rate is higher than the prevailing interest rate, a bond trades at a premium. On the other hand, a bond trades at a discount if the prevailing interest rate is higher than the coupon interest rate. It is also a bond discount if the market rate exceeds the coupon rate.
Incorrect
When the coupon interest rate is higher than the prevailing interest rate, a bond trades at a premium. On the other hand, a bond trades at a discount if the prevailing interest rate is higher than the coupon interest rate. It is also a bond discount if the market rate exceeds the coupon rate.
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Question 7 of 10
7. Question
Under FINRA Rule 11140, what is the normal date for ex-rights?
Correct
The normal dates for ex-rights are the first business days after the effective date of the registration statement provided that definitive information is received sufficiently in advance before the date of the registration statement. If it is not received sufficiently, it would be considered late information.
Incorrect
The normal dates for ex-rights are the first business days after the effective date of the registration statement provided that definitive information is received sufficiently in advance before the date of the registration statement. If it is not received sufficiently, it would be considered late information.
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Question 8 of 10
8. Question
Where shall the interest be based on the settlement of contracts?
I. On a calendar month assuming 30 days is 1/12 of the year
II. On a calendar month assuming 31 days is 1/12 of the year
III. On a 365-day year
IV. On a 360-day yearCorrect
Under FINRA Rule 11620, interests shall be computed based on a 360-day year. Each month shall be considered as 1/12 of the 360 days. It is practically 30 days each month even if February has 28 days and other months have 31 days. In accounting terms, a 30 day period is from the first day of the month up to the last day of the month.
Incorrect
Under FINRA Rule 11620, interests shall be computed based on a 360-day year. Each month shall be considered as 1/12 of the 360 days. It is practically 30 days each month even if February has 28 days and other months have 31 days. In accounting terms, a 30 day period is from the first day of the month up to the last day of the month.
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Question 9 of 10
9. Question
When will a deferred revenue be reclassified as an asset?
Correct
A deferred revenue shall be reclassified as an asset upon the delivery of the goods or services to the customer. Deferred revenue is like accepting prepayment for monthly services and having an agreement that these services must be done daily in one month, instead of paying it every day. Deferred revenue would be recorded as a liability rather than an asset or income.
Incorrect
A deferred revenue shall be reclassified as an asset upon the delivery of the goods or services to the customer. Deferred revenue is like accepting prepayment for monthly services and having an agreement that these services must be done daily in one month, instead of paying it every day. Deferred revenue would be recorded as a liability rather than an asset or income.
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Question 10 of 10
10. Question
What must be avoided by a broker or dealer as a ratio requirement under SEA Rule 15c3-1?
I. To permit its aggregate indebtedness to exceed 1500 percent of its net capital
II. To permit its aggregate indebtedness to exceed 800 percent of its net capital for 12 months after commencing business
III. To have an 8 is to 1 ratio requirement if a firm remains inactive
IV. To commence business on an effective date prescribed by the CommissionCorrect
Any broker or dealer shall not permit its aggregate indebtedness to exceed 1500 percent of its net capital or the 800 percent for 12-month period after commencing business as a broker or dealer. For new broker-dealers, it must commence a business on the effective date prescribed by the Commission. The SEC has the authority to cancel the registration of new broker-dealers if it remains inactive in its first year of operation.
Incorrect
Any broker or dealer shall not permit its aggregate indebtedness to exceed 1500 percent of its net capital or the 800 percent for 12-month period after commencing business as a broker or dealer. For new broker-dealers, it must commence a business on the effective date prescribed by the Commission. The SEC has the authority to cancel the registration of new broker-dealers if it remains inactive in its first year of operation.