RN Domain 6: Physiological Adaptation (Quiz 3) Welcome to your Series 7 Practice Exam 3 This test is designed to prepare you mentally for the actual Series 7 Exam with the same number of (125 questions) and the same time allowed (225 minutes) as the actual exam. The Series 7 Exam is breakdown into four (4) Parts. Here are the Four (4) Domains of the Series 7 Exam with the weightage and number of questions in this practice exam: 1. Seeks Business for the Broker Dealer from Customers and Potential Customers [09 Questions] - 07% 2. Opens Accounts after Obtaining and Evaluating Customers' Financial Profile and Investment Objectives [11 Questions] - 09% 3. Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records [91 Questions] - 73% 4. Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions [14 Questions] - 11% Please click NEXT to start your Free Series 7 PRACTICE EXAM right away. Best of Luck! 1. A testimonial used by a member firm in connection with retail communications must state all of the following except A) the qualifications of the person giving the testimonial if a specialized or experienced opinion is implied. B) that past performance is not indicative of future performance and that other investors may not obtain comparable results. C) the fact that compensation was paid to the person giving the testimonial if more than $100 in value was paid. D) the time period covered by the testimonial. None 2. A registered representative of a FINRA member firm uses her personal smartphone to send a client a text message about a security in the client's portfolio. This practice is A) a personal message and does not come under the FINRA rules on communications with the public. B) considered a retail communication and must have principal approval. C) not permitted under FINRA rules; all electronic communications must be on company-owned devices. D) considered an electronic communication and must be reviewed by a principal. None 3. Correspondence—one of the three categories of communication with the public—is defined as A) any written or electronic communication that is distributed or made available to 25 or fewer retail investors within any 30-calendar-day period. B) communication that is targeted only at individuals who currently maintain accounts with the broker-dealer. C) electronic communication only that has been made available to 25 or fewer retail investors within the past six months. D) written communications only that has been made available to 25 or fewer retail investors within the past six months. None 4. FINRA's rule on communications allows member firms to use testimonials in retail communications as long as certain disclosures are made. Among those disclosures is A) indicating that if any compensation is paid for the testimonial, the fact that it is a paid testimonial. B) indicating that if more than $100 in value is paid for the testimonial, the fact that it is a paid testimonial. C) indicating that if $100 or more in value is paid for the testimonial, the fact that it is a paid testimonial. D) indicating that if less than $100 in value is paid for the testimonial, the fact that it is a paid testimonial. None 5. Lorne Walters is a registered representative with Pecuniary Profits Securities, PPS, a FINRA member firm. Walters has decided to conduct virtual meetings using a system called Xoom. Because he has never used the system before, Walters decides to make a trial run of his securities presentation to six family members who are PPS customers. All of these family members are accredited investors. Which of the following choices best describes this situation? A) Prior approval of PPS may be required, but it is not mandated by FINRA for this public appearance. B) Walters may not recommend securities during the presentation, unless a principal of PPS provides prior approval. C) This constitutes an institutional communication to accredited investors and does not require preapproval by a principal of the firm. D) The virtual meeting may not be archived for later viewing. None 6. A registered representative wants to place advertisements in his daughter's youth athletic league quarterly sponsorship booklet and in the weekly bulletin at his church describing that he specializes in retirement planning and 529 plans. Which of the following statements regarding these advertisements is true? A) Preapproval by a principal of the broker-dealer is required. B) The piece will be regulated as correspondence because it is only being forwarded to two organizations. C) The advertisement is considered institutional communication because it is placed in literature being distributed by organizations such as the youth athletic league and the church organization, and therefore, no principal preapproval is required. D) No approval is required because both the youth athletic league and the church would be recognized as bona fide nonprofit organizations by the IRS. None 7. FINRA Rule 2210, communications with the public, has a number of filing requirements. Some communications are prefiled, others are postfiled, and some are excluded from filing with FINRA. Included in the list of exclusions would be retail communications A) that do no more than identify a national securities exchange symbol of the member or identify a security for which the member is a registered market maker. B) that do no more than identify and recommend a specific registered investment company or family of registered investment companies. C) that do not make any financial or investment recommendation, but only promote a service offered by the member. D) dealing with specific index funds that previously have been filed with FINRA and that are to be used, with the only change being a recommendation of index exchange-traded funds from the same sponsoring organization. None 8. A principal of a member firm with the responsibility of supervising registered representatives would perform all of the following duties except A) approve each securities transaction, whether for retail or institutional customers. B) approve the opening of all new accounts, whether for retail or institutional customers. C) review a registered representative's correspondence with the firm's customers in accordance with the firm's written procedures. D) write all sales material and advertising copy intended to be used as a means of communicating with the public. None 9. Advertising relating to municipal securities must be approved by which of the following? A) A designated supervisory analyst B) The Securities and Exchange Commission (SEC) C) The Municipal Securities Rulemaking Board (MSRB) D) A general securities principal or municipal securities principal None 10. Which of the following is not a benefit gained by using a TOD account? A) Estate taxes are reduced. B) Percentage allocations can be changed at any time. C) Beneficiaries can be changed at any time. D) Probate is avoided. None 11. Designating a beneficiary with a transfer on death (TOD) provision may be done in which of the following accounts? A) Individual account only B) Individual account, joint tenants with right of survivorship (JTWROS), and joint tenants in common (TIC) C) Individual account and joint tenants with right of survivorship (JTWROS) D) Individual account and joint tenants in common (TIC) None 12. If three individuals have a tenants in common account with your firm, and one individual dies, which of the following statements is true? A) Trading is discontinued until the executor names a replacement for the deceased. B) The account is converted to joint tenants with right of survivorship. C) Two survivors continue as cotenants with the decedent's estate. D) The account must be liquidated and the proceeds split evenly among the two survivors and the decedent's estate. None 13. An agent taking which of the following actions would be committing a violation? A) Buying securities in a cash account with the consent of the customer B) Selling securities from a minor's custodial account without the custodian's consent but with the beneficial owner's consent C) Selling securities from a corporate account by using limited power of attorney trading authority for the account D) Buying securities in a joint account at the request of one party only None 14. Two siblings have an account with your broker-dealer registered as joint tenants with right of survivorship (JTWROS). Both live in a state that recognizes community property as an ownership designation. If one of the siblings dies, which of the following will occur? A) The entire account will be liquidated and divided in accordance with the community property laws of that state. B) The deceased sibling's interest in the account will be divided in accordance with the community property laws of that state. C) The deceased sibling's interest in the account will pass to the surviving sibling in accordance with the JTWROS account registration. D) The deceased sibling's interest in the account will become the property of her estate. None 15. Three brothers open a joint account instructing you that if one of them dies, they want the cash and securities in the account to go to the remaining parties to the account. The account should be opened A) as tenants in common. B) as community property. C) with right of survivorship. D) as tenants by the entireties. None 16. Prime brokerage accounts are most often used by A) broker-dealers. B) institutions. C) investment advisers. D) investment bankers. None 17. All of the following statements regarding a transfer on death (TOD) account are correct except A) estate taxes are reduced. B) the owner of the account may change beneficiaries at will. C) only those assets held at the broker-dealer are transferred. D) probate is avoided. None 18. Which of the following is not true in jurisdictions that recognize the marital property designation known as community property? A) Community property laws do not apply to gifts. B) Community property laws do not apply to inheritances. C) Community property applies to property that was owned individually before the marriage and is now joint property once the marriage has occurred. D) There may be tax implications regarding the dissolution of community property at the time of a divorce, marriage annulment, or death. None 19. One of your customers has a JTWROS account and an individual account. The individual account is the one approved for options trading. The customer wishes to make a large options trade and asks you to transfer a substantial sum from the cash balance in the joint account to the individual account. To do this, A) you need the approval of a designated principal. B) the check would have to be made payable in the name of all the owners of the JTWROS account. C) you need the authorization of the customer. D) you need the authorization of both parties on the account and the approval of a designated principal. None 20. An agent is permitted to open all of the following customer accounts except A) a minor's account opened by a custodian. B) an account in the name of Mrs. Jones opened by Mr. Jones. C) a corporate account opened by the designated officer. D) a partnership account opened by the designated partner. None 21. A technical analyst has been charting XYZ stock and notes that it fluctuates between $36 and $41. The last trade was at $39. If the analyst expects a breakout through resistance, which of the following orders should be placed? A) Buy XYZ 35 Stop GTC B) Buy XYZ 35 GTC C) Buy XYZ 42 Stop GTC D) Buy XYZ 42 GTC None 22. Stop orders may be used for each of the following except A) to establish positions. B) to protect profits on short positions. C) to lock in a specific price to close out a position. D) to protect profits on long positions. None 23. One of your customers submits a market on close (MOC) order to sell 300 shares of IYH common stock, traded on the NYSE. The order is entered just before noon ET. At 3:00 pm, trading in IYH is halted for the remainder of the day. What does this do to the customer's order? A) The order is cancelled. B) The customer receives the price of the last trade before the halt. C) The order is carried over to the following business day. D) The order is carried over to the next day that IYH stock is traded. None 24. A market order to purchase 100 shares of XYZ common stock is A) executed at the market close. B) executed at the lowest price of the day. C) good for that day only. D) valid at the stipulated price only. None 25. A client enters a buy stop order for 100 shares of XYZ at 40. Trades then occur at 38, 39, 39.90, 40.05, 40.10, and 39.78. What is the likely price the client paid for the stock? A) $40.05 B) $39.78 C) $40.10 D) $39.00 None 26. A client enters a buy stop order for 100 shares of XYZ at 40. Trades then occur at 38, 39, 39.90, 40.05, 40.10, and 39.78. At what price is the order triggered? A) $40.10 B) $39.00 C) $39.78 D) $40.05 None 27. An investor sold 100 shares of MAS short when the stock was trading at 21. If MAS is now trading at 16, and the investor wants to protect her gain, which of the following orders should she place? A) Sell limit at $16 B) Buy limit at $16 C) Sell stop at $16.25 D) Buy stop at $16.10 None 28. An investor submits an immediate-or-cancel order to sell 500 shares of stock at 32.20. When the order reaches the trading floor, the quote is 32.18 – 32.26, 6 × 6. The investor A) sold 500 shares at 32.18. B) sold 500 shares at 32.26. C) sold 600 shares at 32.26. D) did not sell any shares. None 29. A buy stop order is elected (triggered) when the underlying stock trades A) anywhere below the stop price. B) at or below the stop price. C) through the stop price only. D) at or above the stop price. None 30. At 2:15 pm ET, a customer gives his registered representative a market order to buy 100 shares of ABC at the close. What should the registered representative do with the order? A) Hold it at his desk until just before market close. B) Send the order to the floor immediately. C) Execute the order at the closing price first thing next morning. D) Send in the order after the close to ensure he receives the closing price. None 31. A customer entered an order to sell short 100 shares of ABC. The stock closed on Friday at $48. The stock will trade ex-dividend $0.50 on Monday. At what price can the order be executed at the opening? A) $47.51 B) Any price C) $47.49 D) $47.50 None 32. If a customer with an unrealized gain on a short stock position wishes to protect her profit, she should enter A) a sell stop order. B) a buy limit order. C) a sell limit order. D) a buy stop order. None 33. Each of the following is true about stop orders except A) they can accelerate the advance or decline of a stock's price if executed. B) they become market orders when there is a trade at, or the market passes through, a specific price. C) they are the same as limit orders. D) they can limit a loss in a declining stock. None 34. Each of the following statements concerning fill-or-kill (FOK) orders and all-or-none (AON) orders are true except A) an AON order must be canceled if the whole order cannot be executed immediately. B) an AON order must be filled in its entirety. C) an FOK order must be canceled if the whole order cannot be executed immediately. D) an FOK order must be filled in its entirety. None 35. Owners of a corporation's common stock who are unable to attend the corporation's annual meeting are A) sent proxies to cast their votes. B) unable to change their vote if they should be able to attend the meeting. C) forfeiting their right to vote. D) required to give voting instructions to the broker-dealer handling the account. None 36. All of the following would be included in a penny stock risk disclosure statement except A) the risks of investing in penny stock. B) the broker-dealer's statement of guarantee. C) the definition of penny stock. D) investors' legal rights. None 37. The 5% markup policy applies to all of the following secondary market transactions except A) agency transactions on an exchange. B) municipal bond transactions. C) agency transactions in nonexempt unlisted securities. D) principal transactions in the over-the-counter (OTC) market. None 38. Which of the following provisions of a new corporate debt issue would be least attractive to a potential investor? A) A high nominal yield B) A sinking fund C) A low call price D) Significant collateral None 39. Which of the following is a money market instrument? A) Long-term debt B) Short-term debt C) Preferred stock D) Common stock. None 40. DERF Corporation has a significant amount of cash on hand. The chief financial officer (CFO) has suggested to the chief executive officer (CEO) that it might be wise to pay off $10 million of the company's outstanding debt. There are four bond issues outstanding, and your broker-dealer is approached for advice on determining which issue to repay. Which of these four issues would the firm recommend? A) $15 million @8% due in 10 years, callable at 101 B) $10 million @6% due in 20 years, callable at par C) $25 million @5% due in 5 years, callable at 104 D) $30 million @12% due in 15 years, non-callable None 41. Market interest rates have been rising, which means the price of bonds traded in the secondary market has A) not changed because bond prices are not affected by interest rates. B) not changed because only new bond prices are impacted by changes in interest rates, not the price of bonds already trading in the secondary market. C) decreased. D) increased. None 42. An investor sells 10 5% bonds at a profit and buys another 10 bonds with a 5.25% coupon rate. The investor's yearly return will increase by A) $2.50 per bond. B) $2.00 per bond. C) $1.00 per bond. D) $1.50 per bond. None 43. A corporation plans to make a public tender for 50% of its outstanding bonds. The price of the tender will be set by A) the trustee. B) the issuer. C) the transfer agent. D) the paying agent. None 44. An investor anticipating a fall in interest rates would likely purchase A) noncallable bonds. B) noncallable and callable bonds. C) none of these. D) callable bonds. None 45. When a corporation issues a debt security, the terms of the loan are expressed in a document known as the bond's indenture. The indenture is sometimes referred to as A) the debenture. B) the bond resolution. C) the deed of trust. D) the loan agreement. None 46. A bond you are recommending to a customer has call protection. What does that mean? A) It is the number of years into the issue before the issuer may exercise the call privilege. B) The issuer has set up a sinking fund to provide funds for the call. C) The issuer records the phone number of investors and puts it on the do-not-call list. D) It is the number of years into the issue before the investor may exercise the call privilege. None 47. An investor might expect to receive the greatest gain on an investment in a corporate bond by purchasing A) long-term bonds when interest rates are low. B) short-term bonds when interest rates are high. C) long-term bonds when interest rates are high. D) short-term bonds when interest rates are low. None 48. The legal contract stating the issuer's obligation to pay back a specific amount of money on a specific date to its bondholders is best described as A) the prospectus. B) the official notice of sale. C) the official statement. D) the trust indenture. None 49. What is the amount of interest payable semiannually on a $1,000 par value, 5% corporate bond currently selling at 80 and redeemable at par in 20 years? A) $40 B) $25 C) $50 D) $20 None 50. What happens to outstanding fixed-income securities when market interest rates drop? A) Short-term fixed-income securities are affected most. B) The coupon rates increase. C) The yields increase. D) The prices increase. None 51. A corporation is likely to call eligible debt when interest rates are A) stable. B) rising. C) declining. D) volatile. None 52. A convertible corporate bond with an 8% coupon yielding 7.1% is available but may be called sometime this year. Which feature of this bond would probably be least attractive to your client? A) Coupon yield B) Near-term call C) Current yield D) Convertibility None 53. If a fund has a fixed portfolio of municipal bonds with long maturities, how will substantial changes in general interest rates affect the fund's portfolio? A) The current value will not change, but the investment income will fluctuate significantly. B) Both the income and the current value will fluctuate significantly. C) Both the income and the current value will remain unchanged. D) The current value will fluctuate significantly, but the investment income will remain relatively unchanged. None 54. Corporate bonds are considered safer than common stock issued by the same company because A) if there is a shortage of cash, dividends are paid before interest. B) bonds and similar fixed-rate securities are guaranteed by SIPC. C) the par value of bonds is generally higher than that of stock. D) bonds place the issuer under an obligation but stock does not. None 55. The XYZ Corporation has issued some 4% callable bonds maturing in 20 years. The bonds are callable at 102 commencing in 10 years. Regarding these bonds, which of the following statements is not correct? A) These bonds will appreciate faster in declining interest rate markets than comparable bonds without a call feature. B) The call premium generally will not compensate the bondholder for the loss of interest if the bond is called. C) The bonds will likely be called in a declining interest rate market, forcing the bondholders to reinvest at lower rates. D) XYZ will most probably call these bonds when it can refund the issuer at a lower interest rate. None 56. A corporation has $25 million of 5% bonds outstanding. The bonds are callable at 102. Current market interest rates are 6%. If the company would like to retire $10 million of the debt, it might be smart to A) make a tender offer to purchase $10 million face amount of the bonds. B) exercise the call provision for $10 million face amount of the bonds. C) issue $10 million of new bonds at current rates and use the proceeds to call in outstanding ones. D) issue $10 million of treasury stock and use the proceeds to retire the bonds. None 57. Your customer is interested in long-term corporate bonds. Which of the following interest rate environments makes a call protection feature most valuable to your customer? A) Volatile interest rates B) Rising interest rates C) Stable interest rates D) Declining interest rates None 58. A corporate bond is quoted at 102⅝. A customer buying 10 bonds would pay A) $10,262.50. B) $10,025.80. C) $10,258.00. D) $10,285.00. None 59. A bond investor who is looking for capital gains should invest in bonds when interest rates are A) high and expected to rise. B) high and expected to decline. C) low and expected to rise. D) low and expected to decline. None 60. An investor would most likely purchase money market instruments for their A) liquidity. B) yields. C) inflation protection. D) appreciation potential. None 61. A respected analyst reports that last week's T-bill rate at 1% is lower than the rate for the preceding week and lower than the average for the past month. Which of the following is true? A) The general level of interest rates is increasing. B) Investors are paying more for T-bills. C) Prices are descending. D) Investors are paying less for T-bills. None 62. All of the following are money market instruments except A) commercial paper. B) bankers' acceptances. C) options. D) reverse repurchase agreements. None 63. The Union Fidelity Bank of Highville has issued jumbo CDs with a term of three years and a fixed interest rate of 3.5%. The minimum denomination of the CDs is $100,000, and the CDs are callable at 101% of face value beginning on the first anniversary of the issue date. Under which of the following circumstances is it most likely that the bank would exercise the call feature on that anniversary date? A) Five-year jumbo CDs are currently being issued with a fixed interest rate of 2.7%. B) One-year jumbo CDs are currently being issued with a fixed interest rate of 4%. C) Three-year jumbo CDs are currently being issued with a fixed interest rate of 3.5%. D) Three-year jumbo CDs are currently being issued with a fixed interest rate of 4%. None 64. Which of the following instruments is essentially a letter of credit? A) Negotiable CDs B) Bankers' acceptances. C) Commercial paper D) Margin loans None 65. Which of the following money market instruments is most often used by those in the import/export business? A) Commercial paper. B) Bankers’ acceptances C) Negotiable CDs D) Variable rate demand notes None 66. All of the following statements regarding negotiable jumbo certificates of deposit are true except A) they are fully insured in any denomination by the FDIC. B) they are usually issued in denominations of $100,000 to $1,000,000. C) they are readily marketable. D) they usually have maturities of less than one year. None 67. Which of the following does not issue commercial paper? A) Corporations B) Broker-dealers C) Finance companies D) U.S. Treasury None 68. Which of the following is a short-term money market instrument with a bank guarantee that is used to provide capital for exporters to foreign countries? A) Commercial paper. B) Bankers' acceptances. C) American depositary receipts (ADRs). D) World Bank drawing rights None 69. All of the following statements regarding commercial paper are correct except A) interest is received at maturity. B) it is quoted on a discount yield basis. C) it is quoted as a percentage of par. D) it is unsecured. None 70. It is most accurate to state that commercial paper is A) sold at a discount. B) secured. C) interest bearing. None 71. Debt normally issued by big corporations with reliable credit ratings that seek to finance short-term needs best describes A) certificates of deposit. B) commercial paper. C) revenue anticipation notes. D) T-bills. None 72. When a well-established corporation needs short-term borrowing for working capital needs, it will most likely issue A) a letter of credit. B) a jumbo CD. C) commercial paper. D) preemptive rights. None 73. The minimum face amount of a negotiable CD is A) $50,000. B) $100,000. C) $25,000. D) $10,000. None 74. Which of the following debt instruments trades with accrued interest? A) Negotiable CDs B) Zero-coupon issues C) Treasury bills D) Bankers acceptances None 75. Which of the following is not a characteristic of certificates of deposit (CDs)? A) A CD is often issued by a bank. B) A CD may be payable to the bearer or registered in the name of the investor. C) A CD can be negotiable or nonnegotiable. D) The Federal Deposit Insurance Corporation (FDIC) provides insurance for CDs to $500,000. None 76. Transactions in all of the following are affected in the money market, as opposed to the capital market, except A) jumbo CDs. B) commercial paper. C) municipal revenue bonds. D) U.S. Treasury bills. None 77. Interest and principal on a Eurodollar bond issued in Germany are paid A) in U.S. dollars. B) in German deutsche marks. C) in European Union euros. D) in German euros. None 78. One of your individual customers would like to add some foreign debt securities to their portfolio. When told that the investment would be $2,500, the best suggestion would be to A) contact a broker-dealer in the foreign country of choice and open an account there. B) invest in a mutual fund concentrating in foreign debt securities. C) tell the customer that $2,500 is below the minimum purchase quantity of foreign bonds. D) use one of the overseas branches of your firm to suggest the appropriate issues. None 79. When a bond is issued by a national government, it is called A) sovereign debt. B) high-quality debt. C) national debt. D) treasury debt. None 80. In the United Kingdom, they are called gilts. In Germany, they are called Bunds. In France, they are called OATS. To investors, they are known as A) sovereign debt. B) commodities. C) stock exchanges. D) eurobonds. None 81. When a bond is issued by a national government, it is referred to as A) high-quality debt. B) treasury debt. C) sovereign debt. D) national debt. None 82. A bond issued by a Swiss company, sold outside the United States and the issuer's country, but for which the principal and interest are stated and paid in U.S. dollars, is the definition of a A) Francodollar bond. B) Eurodollar bond. C) Eurobond. D) Matterhornbond. None 83. Many investors, especially institutions, diversify their fixed-income portfolios by purchasing bonds issued outside of the United States. When a French corporation issues a bond denominated in Swiss francs, it is known as A) a euroswiss bond. B) a eurobond. C) a eurodollar bond. D) sovereign debt. None 84. A customer buys a 5% bond at par. The bond is callable in five years at par and matures in 10 years. Which of the following statements is true? A) Nominal yield is higher than either YTM or YTC. B) YTC is higher than YTM. C) YTC is lower than YTM. D) YTC is the same as YTM. None 85. When a bond is selling at a premium A) the nominal yield will always be lower than the yield to call. B) the yield maturity will always be higher than the nominal yield. C) the current yield will always be higher than the yield to maturity. D) the current yield will always be higher than the nominal yield. None 86. Which of the following bonds is most affected by interest rate risk? A) 7.8s of '42 B) 7.6s of '45 C) 7.5s of '39 D) 7.3s of '37 None 87. If interest rates increase, the interest payable on outstanding corporate bonds will A) increase. B) decrease. C) change according to the inverse payout theory. D) remain unchanged. None 88. The LLAW Manufacturing Company issued a 6.25% debenture 5 years ago. The bond is callable in seven years at 102 and matures in 15 years. The bond's current yield is 4.23%. If one of your customers decided to purchase this bond, they would have to understand they would be A) required to pay the call price. B) receiving a yield to maturity in excess of 4.23%. C) paying a premium for the bond. D) buying the bond at a price below par. None 89. The ELLA Distributing Company issued a bond with a nominal yield of 5%. The bond matures in 12 years and is currently trading at 94. The bond's yield to maturity is closest to A) 4.64%. B) 5.00%. C) 5.67%. D) 5.32%. None 90. A callable municipal bond maturing in 30 years is purchased at 102. The bond is callable at par in 15 years. If the bond is called at the first call date, the effective yield earned on the bond is A) not determinable. B) higher than the yield to maturity. C) lower than the yield to maturity. D) the same as the yield to maturity. None 91. An investor is looking to add some fixed-income securities to their portfolio. A registered representative suggests either the ABC 6s of 2050, or the XYZ 6s of 2043. Should there be an increase to market interest rates, A) the XYZ bonds will enjoy a price increase greater than the ABC bonds. B) the ABC bonds will enjoy a price increase greater than the XYZ bonds. C) the ABC bonds will suffer a price decline greater than the XYZ bonds. D) the XYZ bonds will suffer a price decline greater than the ABC bonds. None 92. Which of the following statements regarding a bond quoted as QRS Zr 32 is true? A) The bond pays $12 interest annually. B) The bond pays $120 interest annually. C) The bond pays no interest until maturity. D) The interest payable is tax free. None 93. Two bonds currently quoted at a 5.50 basis mature in exactly 15 years. Their coupons are 6% and 7%, respectively. Which bond would experience the greatest appreciation in value if the yields dropped to a 5.20 basis? A) Neither because both would decline in value B) The 7% bond C) The 6% bond D) Both would appreciate the same amount None 94. The current yield on a bond with a coupon rate of 7.5% currently selling at 105½ is approximately A) 7.5%. B) 8%. C) 6.5%. D) 7.1%. None 95. A bond has a 7% coupon and an offering price of 108. The bond matures in ten years. An investor purchasing this bond at the offering price would have a yield to maturity closest to A) 7.80%. B) 7.50%. C) 5.96% D) 7.22%. None 96. A bond offered at par has a coupon rate A) greater than its yield to maturity. B) less than its yield to maturity. C) equal to its current yield. D) less than its current yield. None 97. In which of the following will a change in interest rates cause the greatest price fluctuation? A) 7% 30-year U.S. Treasury bond B) Series EE bond C) 7% AA-rated one-year municipal note D) 7% AAA-rated corporate bond with eight years until maturity None 98. The CAST Corporation's first mortgage bond has a 5% coupon and a yield to maturity of 7%. The bond is callable in 10 years at 103. The bond is trading at A) a discount. B) the call price. C) par. D) a premium. None 99. Which of the following statements regarding a $1,000 corporate 8.50% bond offered at 110 is true? A) The bond is a discount bond. B) To determine the bond's current yield, its stated rate must be compared against other fixed-rate investments in the client's portfolio. C) The bond's current yield is calculated by dividing its annual interest by its market price. D) The bond's current yield is lower than its yield to maturity. None 100. Nickelplate Manufacturing Corporation (NMC) is capitalized with 1 million shares of a 6% $50 par callable preferred stock and 10 million shares of $1 par common stock. Your customer's required rate of return on fixed income investments is 8%. The NMC preferred stock would be an appropriate addition to this customer's portfolio only if the stock was not priced in excess of A) $75.00. B) $66.66. C) $37.50. D) $40.00. None 101. A 5% bond is trading at a premium. Which of the following would be the bond's highest yield? A) Yield to maturity B) Current yield C) Dividend yield D) Coupon yield None 102. Three 3% bonds are listed in the newspaper. One bond will mature in one year, another bond will mature in 10 years, and the third bond will mature in 20 years. If interest rates are going up, which bond will have the greatest decrease in value? A) The bond with the 10-year maturity B) None, as they will all have the same decrease in value C) The bond with the 1-year maturity D) The bond with the 20-year maturity None 103. Nickelplate Manufacturing Corporation (NMC) is capitalized with 1 million shares of a 6% $50 par callable preferred stock and 10 million shares of $1 par common stock. With the preferred stock currently selling at $75 per share and the common stock at $60 per share, the current yield of the preferred stock is closest to A) 6%. B) 8%. C) 4%. D) 5%. None 104. A corporate bond with a nominal yield of 6% is currently trading at a yield to maturity (YTM) of 5.8%. It would be accurate to state that this bond is trading at A) par. B) parity. C) a discount. D) a premium. None 105. In a scenario of falling interest rates and a positive yield curve, assuming all to be of equal face value, which of the following bonds will appreciate the most? A) 1-year bond selling at a premium B) 20-year bond selling at a discount C) 1-year bond selling at a discount D) 20-year bond selling at a premium None 106. An investor sells 10 5% bonds at a profit and buys another 10 bonds with a 5¼% coupon rate. The investor's yearly return will increase by A) $2.50 per bond. B) $2.00 per bond. C) $1.00 per bond. D) $1.50 per bond. None 107. When a bond is selling at a discount A) the nominal yield will always be lower than the current yield. B) the current yield will always be higher than the yield to call. C) the yield to maturity will always be lower than the current yield. D) the yield to call will always be lower than the yield to maturity. None 108. The following is taken from the S&P Bond Guide: FLB Zr 37 87 87½. What is the coupon rate on this bond? A) 8.70% B) 0.37% C) 8.75% D) 0% None 109. If the dollar price of a municipal bond is 101 and, at that price, the basis is 6.10, the nominal yield is A) less than 6.10%. B) exactly 6.10%. C) greater than 6.10%. D) less than the coupon rate. None 110. The price of which of the following will fluctuate most with a change in interest rates? A) Money market instruments B) Common stock. C) Short-term bonds D) Long-term bonds None 111. The price of which of the following will fluctuate most with fluctuating interest rates? A) Short-term bonds B) Long-term bonds C) Money market instruments D) Common stock None 112. Which of the following callable municipal bonds trading on a 7% basis is most likely to be called? A) 7.5% coupon, callable at 100 in 2030 B) 6.5% coupon, callable at 100 in 2030 C) 6.5% coupon, callable at 105 in 2030 D) 7.5% coupon, callable at 105 in 2030 None 113. The coupon on a bond can be described as its A) basis. B) yield to call. C) current yield. D) nominal yield. None 114. The basis of a bond with a 5% nominal yield maturing in twenty years and selling at 115 is approximately A) 5.75%. B) 4.35%. C) 4.65%. D) 3.95%. None 115. Which of the following expressions describes the current yield of a bond? A) Yield to maturity divided by par value B) Annual interest payment divided by current market price C) Annual interest payment divided by par value D) Yield to maturity divided by current market price None 116. The basis of a bond with a 5% nominal yield maturing in twenty years and selling at 85 is approximately A) 4.59%. B) 6.22%. C) 5.75%. D) 5.88%. None 117. Six percent XYZ debentures are trading for $1,200. Other similarly rated bonds are offered at 4.5%. What is the current yield on the 6% XYZ debentures? A) 1.5% B) 5% C) 6% D) 7.5% None 118. You have a customer who is interested in reliable income. The customer recently added a bond maturing in 20 years to the portfolio. The bond has a duration of 12 years and four months, and the purchase price was $1,295.87. Which of the following statements is correct? A) The yield to maturity is less than both the current yield and the coupon rate. B) The coupon rate is higher than the yield to maturity, and the yield to maturity is higher than the current yield. C) The coupon rate is lower than the yield to maturity, and the current yield should be higher than the coupon rate. D) The current yield is higher than both the coupon rate and the yield to maturity. None 119. The market price of fixed-income securities, especially bonds, are highly sensitive to changes in market interest rates. Based on that knowledge, which of the following bonds will have the greatest price change when market interest rates decrease? A) 10-year maturity, 4% coupon B) 10-year maturity, 6% coupon C) 20-year maturity, 6% coupon D) 20-year maturity, 4% coupon None 120. The market price of fixed-income securities, especially bonds, is highly sensitive to changes in market interest rates. Based on that knowledge, which of the following bonds will have the greatest price change when market interest rates increase? A) 20-year maturity, 6% coupon B) 20-year maturity, 4% coupon C) 10-year maturity, 6% coupon D) 10-year maturity, 4% coupon None 121. An analyst is comparing the yields of U.S. Treasury bonds and AAA-rated corporate bonds with similar maturities. This measurement would indicate an improving economy when A) the yield spread is remaining stable. B) the yield spread is narrowing. C) the yield spread is widening. D) the yields on the Treasury bonds are lower than those on the corporate bonds. None 122. A bond would be considered speculative below which of the following Standard & Poor's (S&P) ratings? A) BBB B) BB C) B D) A None 123. When part of an issue of speculative bonds with a 25-year maturity are called, the effect on the remaining bonds will be to A) improve their quality. B) increase their coupon rate. C) decrease their coupon rate. D) decrease their quality. None 124. Most rating services rate which of the following? A) Reinvestment risk B) Marketability C) Quality D) Durability None 125. An economist is comparing the yields on 20-year U.S. Treasury bonds and AAA-rated corporate bonds with the same maturity. The economist is analyzing A) the risk spread. B) the credit spread. C) the duration spread. D) the value spread. None 1 out of 125 Time is Up! Time's upTime is Up!
