STC Exam #4 questions with correct answers
graded A+ updated
1. Which TWO of the following II and IV If interest rates are expected to rise, the
se- curities would be MOST most suitable investments would be those that can be
suitable if interest rates are reinvested quickly to take advantage of rising rates,
expected to rise? or variable or adjustable-rate securities. Bonds
with short-term maturi-
I Collateralized Mortgage Obliga- ties can be reinvested in bonds quickly with
higher rates,
tions and the dividend on adjustment-rate preferred stock
would
II A bond with short-term maturi- increase since the dividend paid is based on
LIBOR or
ties another rate that quickly reacts to changing interest
III Preferred stock with a rates.
fixed dividend
IV Adjustable-rate preferred
stock
2. Which TWO of the following
choices can be calculated I and III
by ex- EBIT may be found by subtracting the operating
expenses
amining the income statement of from the sales or revenue of a company, and
the operating
a company? 3. If an investor is bearish on
I The earnings before
interest and tax (EBIT)
II The debt-to-equity ratio
III The operating profit
margin
IV The amount of working
capital
1/
51
,STC Exam #4 questions with correct answers
graded A+ updated
profit margin is found by dividing the sales by be calculated by examining a company's bal- ance
the operating expenses. All of this information sheet.
can be found in the income statement. The debt-
to-equity ratio and amount of working capital can
Russell Index ETFs
small-cap stocks, which of the fol- The Russell Index is a benchmark for small-cap
stocks. All
lowing products should be avoid- of the other answer choices track something
other than
ed? small-cap equities. MSCI Emerging Market Index
Russell Index ETFs ETFs track securities that are listed on foreign
MSCI Emerging Market securities exchanges of emerging markets. Diamonds
Index ETFs are ETFs that mirror the DJIA (i.e., large-cap equities).
Diamonds REITs primarily invest in real estate holdings.
REITs
2/
51
,STC Exam #4 questions with correct answers
graded A+ updated
4. A RR should update a When there is a change in the clients purchases or
client's fi- nancial condition sales that might indicate a ditterent financial
or status: situation.
-When there is an obvious While some clients may keep the firm well informed of
change in the economy of the any changes, others may not be so forthcoming.
client's hometown Changes in
-When there is a change in a client's patterns of purchases and sales may indicate
the clients purchases or a ditterent financial situation.
sales that might indicate a
different finan- cial situation
-When informed by a friend
or relative
-Only after any meeting
with the client
5. A Swiss company that is
expect- ing payment from a Buy Swiss franc calls
customer in
If the value of the U.S. dollar declines, the value of the
Swiss
U.S. dollars is concerned that the franc will increase. The company should buy
Swiss franc
dollar will decline in value. Write Swiss franc straddles
To hedge against a decline
in the 6. Which of the following state-
U.S. dollar, the Swiss ments is TRUE concerning a cus-
company should:
Buy Swiss franc puts
Buy Swiss franc calls
Write Swiss franc
calls
3/
51
, STC Exam #4 questions with correct answers
graded A+ updated
calls since it will profit on the calls if the U.S.
dollar declines, leading to a Swiss franc increase.
The profit on the call could help to ottset the loss
on the U.S. dollars it is expecting to receive as
payment. The customer is not required to use ACATS.
If a customer wants to transfer his account to
another
tomer who would like to transfer member firm, the system used by most
broker-dealers is
an account held by a broker-deal- known as ACATS, which is a service ottered by
the National
er? Securities Clearing Corporation (NSCC). A customer is
not
4/
51
graded A+ updated
1. Which TWO of the following II and IV If interest rates are expected to rise, the
se- curities would be MOST most suitable investments would be those that can be
suitable if interest rates are reinvested quickly to take advantage of rising rates,
expected to rise? or variable or adjustable-rate securities. Bonds
with short-term maturi-
I Collateralized Mortgage Obliga- ties can be reinvested in bonds quickly with
higher rates,
tions and the dividend on adjustment-rate preferred stock
would
II A bond with short-term maturi- increase since the dividend paid is based on
LIBOR or
ties another rate that quickly reacts to changing interest
III Preferred stock with a rates.
fixed dividend
IV Adjustable-rate preferred
stock
2. Which TWO of the following
choices can be calculated I and III
by ex- EBIT may be found by subtracting the operating
expenses
amining the income statement of from the sales or revenue of a company, and
the operating
a company? 3. If an investor is bearish on
I The earnings before
interest and tax (EBIT)
II The debt-to-equity ratio
III The operating profit
margin
IV The amount of working
capital
1/
51
,STC Exam #4 questions with correct answers
graded A+ updated
profit margin is found by dividing the sales by be calculated by examining a company's bal- ance
the operating expenses. All of this information sheet.
can be found in the income statement. The debt-
to-equity ratio and amount of working capital can
Russell Index ETFs
small-cap stocks, which of the fol- The Russell Index is a benchmark for small-cap
stocks. All
lowing products should be avoid- of the other answer choices track something
other than
ed? small-cap equities. MSCI Emerging Market Index
Russell Index ETFs ETFs track securities that are listed on foreign
MSCI Emerging Market securities exchanges of emerging markets. Diamonds
Index ETFs are ETFs that mirror the DJIA (i.e., large-cap equities).
Diamonds REITs primarily invest in real estate holdings.
REITs
2/
51
,STC Exam #4 questions with correct answers
graded A+ updated
4. A RR should update a When there is a change in the clients purchases or
client's fi- nancial condition sales that might indicate a ditterent financial
or status: situation.
-When there is an obvious While some clients may keep the firm well informed of
change in the economy of the any changes, others may not be so forthcoming.
client's hometown Changes in
-When there is a change in a client's patterns of purchases and sales may indicate
the clients purchases or a ditterent financial situation.
sales that might indicate a
different finan- cial situation
-When informed by a friend
or relative
-Only after any meeting
with the client
5. A Swiss company that is
expect- ing payment from a Buy Swiss franc calls
customer in
If the value of the U.S. dollar declines, the value of the
Swiss
U.S. dollars is concerned that the franc will increase. The company should buy
Swiss franc
dollar will decline in value. Write Swiss franc straddles
To hedge against a decline
in the 6. Which of the following state-
U.S. dollar, the Swiss ments is TRUE concerning a cus-
company should:
Buy Swiss franc puts
Buy Swiss franc calls
Write Swiss franc
calls
3/
51
, STC Exam #4 questions with correct answers
graded A+ updated
calls since it will profit on the calls if the U.S.
dollar declines, leading to a Swiss franc increase.
The profit on the call could help to ottset the loss
on the U.S. dollars it is expecting to receive as
payment. The customer is not required to use ACATS.
If a customer wants to transfer his account to
another
tomer who would like to transfer member firm, the system used by most
broker-dealers is
an account held by a broker-deal- known as ACATS, which is a service ottered by
the National
er? Securities Clearing Corporation (NSCC). A customer is
not
4/
51
