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Question 1 of 10
1. Question
Which of the following is used to calculate bond duration?
I. Coupon
II. Final maturity
III. Credit spread
IV. Net present valueCorrect
Bond duration is a product of multiple factors related to bonds and their issues. The factors used to calculate bond duration are the net present value, yield, coupon, final maturity, and call features.
Incorrect
Bond duration is a product of multiple factors related to bonds and their issues. The factors used to calculate bond duration are the net present value, yield, coupon, final maturity, and call features.
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Question 2 of 10
2. Question
According to the USA, the administrator may use any of four powers in the enforcement of its regulations. Which of the following applies?
I. make rules and orders but cannot change them.
II. deny, suspend, cancel, or revoke registrations and licenses
III. conduct investigations and issue subpoenas
IV. issue cease and desist orders and seek injunctionsCorrect
According to the USA, the administrator may use any of four powers in the enforcement of its regulations: make, change, or repeal rules and orders; conduct investigations and issue subpoenas; issue cease and desist orders and seek injunctions; and deny, suspend, cancel, or revoke registrations and licenses.
Incorrect
According to the USA, the administrator may use any of four powers in the enforcement of its regulations: make, change, or repeal rules and orders; conduct investigations and issue subpoenas; issue cease and desist orders and seek injunctions; and deny, suspend, cancel, or revoke registrations and licenses.
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Question 3 of 10
3. Question
Regarding the penny stock rules, which of the following functions must a broker/dealer perform?
I. Provide investment services and supervise those who do.
II. Disclose to the customer the total compensation received in connection with transaction before transacting in penny stock on behalf of the customer.
III. Disclose to the customer the total compensation received by any associated person of the broker/dealer in connection with the transaction before transacting in penny stock on behalf of the customer.
IV. Provide investment advise, reports and analyses with respect to securities before transacting in penny stock on behalf of the customer.Correct
Regarding the penny stock rules:
• A broker/dealer must disclose to the customer the total compensation received in connection with transaction before transacting in penny stock on behalf of the customer.
• A broker/dealer must disclose to the customer the total compensation received by any associated person of the broker/dealer in connection with the transaction before transacting in penny stock on behalf of the customer.Incorrect
Regarding the penny stock rules:
• A broker/dealer must disclose to the customer the total compensation received in connection with transaction before transacting in penny stock on behalf of the customer.
• A broker/dealer must disclose to the customer the total compensation received by any associated person of the broker/dealer in connection with the transaction before transacting in penny stock on behalf of the customer. -
Question 4 of 10
4. Question
Regarding the registration of agents of broker-dealers, which of the following statement is true?
I. The person must submit an application; form U-4 is rarely used in this regard.
II. There is no minimum net worth requirement for an agent prior to registration.
III. The administrator may require that the agent of a broker be bonded.
IV. Agents must not act in any capacity until their registration is complete.Correct
A person who is registering to be an agent of a broker-dealer must submit an application. This is Form U-4 in most cases. There is no minimum net worth requirement for an agent; however, the Administrator may require that the agent be bonded.
While agents are waiting for their registration to become effective, they may act in any capacity that does not require them to contact clients or solicit securities transactions. They may act in a ministerial role and perform clerical and administrative duties.Incorrect
A person who is registering to be an agent of a broker-dealer must submit an application. This is Form U-4 in most cases. There is no minimum net worth requirement for an agent; however, the Administrator may require that the agent be bonded.
While agents are waiting for their registration to become effective, they may act in any capacity that does not require them to contact clients or solicit securities transactions. They may act in a ministerial role and perform clerical and administrative duties. -
Question 5 of 10
5. Question
Which is the following statements is false?
I. The agent of a broker may perform clerical and administrative duties while waiting for his registration to become effective.
II. The jurisdiction granted to an administrator is not limited to securities transactions that were initiated in the administrator’s state of authority.
III. The administrator does not have the power to issue subpoenas.
IV. No security is exempt from the antifraud clauses of the Uniform Securities Act (USA).Correct
As clearly defined in the Uniform Securities Act (USA), the jurisdiction and authority granted to the administrator apply only to securities transactions that were initiated in the administrator’s state of authority, directed to that administrator’s state of authority or accepted in that state.
According to the USA, the administrator may use any of four powers in the enforcement of its regulations, one of which is to conduct investigations and issue subpoenas.Incorrect
As clearly defined in the Uniform Securities Act (USA), the jurisdiction and authority granted to the administrator apply only to securities transactions that were initiated in the administrator’s state of authority, directed to that administrator’s state of authority or accepted in that state.
According to the USA, the administrator may use any of four powers in the enforcement of its regulations, one of which is to conduct investigations and issue subpoenas. -
Question 6 of 10
6. Question
Which of the following statement is false?
I. Securities transactions are covered by the Federal Deposit Insurance Corporation (FDIC).
II. Securities transactions are guaranteed by some banks.
III. Investors should receive full disclosure of risks before they invest in securities.
IV. The level of disclosure an investor receives should depend on the level of capital he is willing to invest.Correct
Full and proper disclosure is one of the keys to investment advisors maintaining ethical practices. Investors should also receive full disclosure of risk and be informed that securities transactions are not guaranteed and may result in loss. They should be fully aware that securities transactions are not covered by the Federal Deposit Insurance Corporation (FDIC) and that there is no bank guarantee.
Incorrect
Full and proper disclosure is one of the keys to investment advisors maintaining ethical practices. Investors should also receive full disclosure of risk and be informed that securities transactions are not guaranteed and may result in loss. They should be fully aware that securities transactions are not covered by the Federal Deposit Insurance Corporation (FDIC) and that there is no bank guarantee.
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Question 7 of 10
7. Question
The following are red flags that point to suspicious activity and must be reported by securities dealers, except:
I. If the broker-dealer knows that the transaction is intended to disguise illegal activity.
II. If the broker-dealer is aware that the purpose of the transaction is to circumvent the provisions of the Bank Secrecy Act.
III. If the broker-dealer cannot identify a legitimate purpose for a particular transaction based on available facts.
IV. If the broker-dealer would be required to engage in criminal activity in order to complete a requested transaction.Correct
Securities dealers are obligated to report activity that could be tied to money laundering. The industry has identified four red flags that point to suspicious activity that should be reported.
Incorrect
Securities dealers are obligated to report activity that could be tied to money laundering. The industry has identified four red flags that point to suspicious activity that should be reported.
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Question 8 of 10
8. Question
The following are true about bond duration except:
I. Duration gives the investor an idea of the value of a bond based on whether interest rates increase or decline.
II. Longer duration periods tend to make the value of the bond fluctuate.
III. Final bond maturity and call features are not used to calculate bond duration.
IV. Bond duration can be a measure of volatility based on interest rate movements and the maturity of the bond.Correct
Bond duration is a product of multiple factors related to bonds and their issues. The factors used to calculate bond duration are the net present value, yield, coupon, final maturity, and call features.
Incorrect
Bond duration is a product of multiple factors related to bonds and their issues. The factors used to calculate bond duration are the net present value, yield, coupon, final maturity, and call features.
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Question 9 of 10
9. Question
The following statements are true, except:
I. When a debt instrument is issued, the issuing entity pays a fixed interest rate until maturity.
II. A bonds duration may be longer than its time to maturity.
III. At maturity, bond is redeemed at par value by the issuing entity.
IV. Bonds should not trade on the secondary market until maturity.Correct
Bonds may trade on the secondary market at a discount or premium to par until maturity. At maturity, the issuing entity redeems the bond at par value and is no longer obligated to pay the fixed rate. Duration is a function of maturity that uses the bond’s maturity as part of the calculation. While duration and maturity are both usually measured in years, a bond’s duration may be longer or shorter than its time to maturity based upon the bond’s net present value, yield, coupon, maturity, and call features.
Incorrect
Bonds may trade on the secondary market at a discount or premium to par until maturity. At maturity, the issuing entity redeems the bond at par value and is no longer obligated to pay the fixed rate. Duration is a function of maturity that uses the bond’s maturity as part of the calculation. While duration and maturity are both usually measured in years, a bond’s duration may be longer or shorter than its time to maturity based upon the bond’s net present value, yield, coupon, maturity, and call features.
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Question 10 of 10
10. Question
An insurance policy that helps the insured, injured party, usually for a specific period of time;
I. provides relief to the injured party to cope with his injury
II. provides payment to the injured party, to cope with the loss of income
III. provides payment to the injured, based on the extent of his injury
IV. provides payment to the injured, based on his present incomeCorrect
Disability insurance is an insurance policy that helps the insured cope with the loss of income resulting from disability by providing payments to the injured party, usually for a specific period of time. Needs for disability insurance vary from client to client. The main and most obvious need for compensation is replacement of current income. A client with a high income will require a higher disability income. Also of consideration is the client’s occupation.
Incorrect
Disability insurance is an insurance policy that helps the insured cope with the loss of income resulting from disability by providing payments to the injured party, usually for a specific period of time. Needs for disability insurance vary from client to client. The main and most obvious need for compensation is replacement of current income. A client with a high income will require a higher disability income. Also of consideration is the client’s occupation.