Exam (elaborations)
Custom 135 (1)
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Exam of 3 pages for the course Chapter 5: Time Value of Money at Chapter 5: Time Value of Money (Custom 135 (1))
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Custom 135A new customer has been approved for all levels of options trading and has signed the options
disclosure document. Even though approved for all levels of options trades, she notes that she
will not be employing, and the registered representative (RR) should not recommend, any
strategies with unlimited maximum loss potential. Given this criteria, an RR could suitably
recommend - ANS-short or long spreads
marking to the market is used to adjust what - ANS-the positions in margin accounts based
upon current market prices
ABC corp. is planning an offering of $10 million of common stock, when would it be prohibited
for the company to place a tombstone ad - ANS-before the registration statement is filed with
the SEC
the VIX rises when - ANS-put buying on the SPX (S&P 500) increases
DCI is planning a direct mail campaign to several thousand potential investors, the topic of the
campaign deals with owning real estate through DPP limited partnerships, under FINRA Rule
2210 on communications with the public is considered - ANS-a retail communication and must
be filed with FINRA within 10 business days of first use or publication
when an issuer of a preferred stock exercises the call it is usually at a price somewhat above
par value, this excess over par is - ANS-the call premium
An investor wants to invest $20,000 but anticipates needing those funds in five years for a
business investment. Currently, with inflation rising, the government is expected to take action to
push interest rates up to reduce the money supply. Given these conditions, which of the
following securities would be the least suitable for this investor who needs a specific amount of
money in five years? - ANS-a zero tranche collateralized mortgage obligation with an estimated
five years of life (zero tranche is subject to interest rate risk as well as extension risk when
interest rates rise)
guarantees on insurance products must be - ANS-specific to the insurance contract and not
associated investments
During a period of sustained low interest rates, many investors, particularly institutions, look to
increase their return through alternative debt investments. Examples of those would include all
of the following except
a. ELNs
b. leveraged ETFs
c. ETNs
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