ANSWERS|LATEST !!!!2026|GRADED A+| (EXAM
What type of risk is unique to a specific industry, business enterprise, or investment type? -
ANSWER Nonsystematic risk
Under which of the following circumstances is an investor in a position to acquire stock? -
ANSWER Buy a call, sell a call (The holder of a call has the right to buy stock at the
strike price if exercised. The seller of a put is obligated to buy stock at the strike price if
exercised)
Options- a premium - ANSWER the cost of an option contract, expressed in dollars
per share of the underlying stock
Options- strike price - ANSWER The price at which the stock will be bought or sold if
the contract is exercised, expressed in dollars per share
A customer believes that ABC's price will go up but does not have the money to buy 100
shares right now. How could the customer use options to profit from an increase in the
stock's price? - ANSWER buy calls, write puts (both are bullish)
A corporation's offer to current stockholders of the ability to purchase a proportionate
number of new shares at a specific price for a limited time is called a - ANSWER right
(they usually expire in 30-45 days)
American depositary receipts (ADRs) - ANSWER issued by banks, represent a specific
number of shares of a foreign company, and trade and pay dividends in dollars
1
,Which of the following records must be maintained for 6 years? -
ANSWER Customer ledgers (statements)
While underwriters can assist with preparation and filing, the accuracy and adequacy of
these documents is the responsibility of the - ANSWER Issuing corporation
What institutions serve as depository and clearing facilities? - ANSWER Depository
Trust Company and National Securities Clearing Corporation (most specifically) then carrying
and clearing firms can act as these as well.
What is a transfer agent? - ANSWER (often a bank) for a corporation is responsible
for ensuring that its securities are issued in the correct owner's name, canceling old and
issuing new certificates, maintaining records of ownership, and handling problems relating
to lost, stolen, or destroyed certificates
What is the function of the clearing corporation? - ANSWER Acting as an
intermediary in a trade, examples of these can be a commercial bank, can be a broker-dealer
but doesn't have to be
Who is considered a control person (security) - ANSWER those owned by directors,
officers, or persons (which include corporations, trusts, etc.) who own or control 10% or
more of the issuer's equity securities (an unaffiliated person would have to own 10% or
more of the outstanding shares)
What are the two components of Return on Investment? - ANSWER Capital gains
and income
To expand the overall economy, we want to - ANSWER buy securities via open-
market operations, pushing interest rates down
2
,To meet a Regulation T margin call, a customer would have how long? -
ANSWER settlement plus 2 additional business days (or S + 2)
What is A fully disclosed broker-dealer - ANSWER one that introduces its business to
a carrying firm to clear transactions
The regulation enacted by the SEC to protect the privacy of customer information is known
as - ANSWER Regulation S-P
A market maker that does not honor its firm quote is said to be - ANSWER "backing
away"
A deficit in the U.S. balance of payments can occur if - ANSWER interest rates in
foreign countries are higher than U.S. domestic rates and U.S. consumers are purchasing
(importing) foreign goods
The general partner of a limited partnership has responsibility of -
ANSWER Organizing and managing the partnership, assumes unlimited liability, and
is responsible for paying all partnership debts
To grow or expand the economy, U.S. fiscal policy should be to - ANSWER cut taxes
(so consumers have more money to spend) and increase government spending for programs
and development (to create more jobs)
What is the federal funds rate - ANSWER the rate commercial money center banks
charge each other for an overnight, unsecured loan
The Federal Open Market Committee (FOMC) - ANSWER buy or sell Treasury
securities in the open market. Purchases add money to the economy, making the money
available to lend more plentiful, and sales take money out of the economy, making money
available to lend less plentiful.
3
, Reports of rising inventories generally occur during which period of the business cycle? -
ANSWER Contraction, due to a lack of consumer demand
Who is exempt from registering with SIPC? - ANSWER Those who deal exclusively
with US Government securities (i.e.-Treasury bonds), exclusively municipality securities, and
in redeemable investment company securities
Retail investor - ANSWER An individual who makes investments such as the
purchase of securities for his or her account rather than for an organization
Market maker - ANSWER Any entity, individual or organization, willing to accept the
risk of holding a particular security in its own account to facilitate trading and provide
liquidity in that security
When the Federal Reserve Board wants to expand (loosen) the money supply, it will -
ANSWER buy Treasury securities from banks in the open market
SROs functioning under the SEC include... - ANSWER FINRA, MSRB and CBOE
Mild inflation can - ANSWER encourage growth and stimulate the economy
Discount rate - ANSWER The rate the FRB charges member banks
Prime rate - ANSWER The rate commercial banks (Wells Fargo) charges their most
creditworthy investors (Lincoln Financial). Prime rate decreases when banks sell securities
because there's money money in the market and don't need to charge as much. Raise the
rate when they buy securities.
4
What type of risk is unique to a specific industry, business enterprise, or investment type? -
ANSWER Nonsystematic risk
Under which of the following circumstances is an investor in a position to acquire stock? -
ANSWER Buy a call, sell a call (The holder of a call has the right to buy stock at the
strike price if exercised. The seller of a put is obligated to buy stock at the strike price if
exercised)
Options- a premium - ANSWER the cost of an option contract, expressed in dollars
per share of the underlying stock
Options- strike price - ANSWER The price at which the stock will be bought or sold if
the contract is exercised, expressed in dollars per share
A customer believes that ABC's price will go up but does not have the money to buy 100
shares right now. How could the customer use options to profit from an increase in the
stock's price? - ANSWER buy calls, write puts (both are bullish)
A corporation's offer to current stockholders of the ability to purchase a proportionate
number of new shares at a specific price for a limited time is called a - ANSWER right
(they usually expire in 30-45 days)
American depositary receipts (ADRs) - ANSWER issued by banks, represent a specific
number of shares of a foreign company, and trade and pay dividends in dollars
1
,Which of the following records must be maintained for 6 years? -
ANSWER Customer ledgers (statements)
While underwriters can assist with preparation and filing, the accuracy and adequacy of
these documents is the responsibility of the - ANSWER Issuing corporation
What institutions serve as depository and clearing facilities? - ANSWER Depository
Trust Company and National Securities Clearing Corporation (most specifically) then carrying
and clearing firms can act as these as well.
What is a transfer agent? - ANSWER (often a bank) for a corporation is responsible
for ensuring that its securities are issued in the correct owner's name, canceling old and
issuing new certificates, maintaining records of ownership, and handling problems relating
to lost, stolen, or destroyed certificates
What is the function of the clearing corporation? - ANSWER Acting as an
intermediary in a trade, examples of these can be a commercial bank, can be a broker-dealer
but doesn't have to be
Who is considered a control person (security) - ANSWER those owned by directors,
officers, or persons (which include corporations, trusts, etc.) who own or control 10% or
more of the issuer's equity securities (an unaffiliated person would have to own 10% or
more of the outstanding shares)
What are the two components of Return on Investment? - ANSWER Capital gains
and income
To expand the overall economy, we want to - ANSWER buy securities via open-
market operations, pushing interest rates down
2
,To meet a Regulation T margin call, a customer would have how long? -
ANSWER settlement plus 2 additional business days (or S + 2)
What is A fully disclosed broker-dealer - ANSWER one that introduces its business to
a carrying firm to clear transactions
The regulation enacted by the SEC to protect the privacy of customer information is known
as - ANSWER Regulation S-P
A market maker that does not honor its firm quote is said to be - ANSWER "backing
away"
A deficit in the U.S. balance of payments can occur if - ANSWER interest rates in
foreign countries are higher than U.S. domestic rates and U.S. consumers are purchasing
(importing) foreign goods
The general partner of a limited partnership has responsibility of -
ANSWER Organizing and managing the partnership, assumes unlimited liability, and
is responsible for paying all partnership debts
To grow or expand the economy, U.S. fiscal policy should be to - ANSWER cut taxes
(so consumers have more money to spend) and increase government spending for programs
and development (to create more jobs)
What is the federal funds rate - ANSWER the rate commercial money center banks
charge each other for an overnight, unsecured loan
The Federal Open Market Committee (FOMC) - ANSWER buy or sell Treasury
securities in the open market. Purchases add money to the economy, making the money
available to lend more plentiful, and sales take money out of the economy, making money
available to lend less plentiful.
3
, Reports of rising inventories generally occur during which period of the business cycle? -
ANSWER Contraction, due to a lack of consumer demand
Who is exempt from registering with SIPC? - ANSWER Those who deal exclusively
with US Government securities (i.e.-Treasury bonds), exclusively municipality securities, and
in redeemable investment company securities
Retail investor - ANSWER An individual who makes investments such as the
purchase of securities for his or her account rather than for an organization
Market maker - ANSWER Any entity, individual or organization, willing to accept the
risk of holding a particular security in its own account to facilitate trading and provide
liquidity in that security
When the Federal Reserve Board wants to expand (loosen) the money supply, it will -
ANSWER buy Treasury securities from banks in the open market
SROs functioning under the SEC include... - ANSWER FINRA, MSRB and CBOE
Mild inflation can - ANSWER encourage growth and stimulate the economy
Discount rate - ANSWER The rate the FRB charges member banks
Prime rate - ANSWER The rate commercial banks (Wells Fargo) charges their most
creditworthy investors (Lincoln Financial). Prime rate decreases when banks sell securities
because there's money money in the market and don't need to charge as much. Raise the
rate when they buy securities.
4
