Series 28: Exercise

Exercise

Choose the best answer

1. 1. What is the haircut percentage for U.S. Treasury notes?
2. A. 1/2%
3. B. 1%
4. C. 2%
5. D. Depends on the maturity of the issue
6. 2. What is the haircut percentage for money market funds?
7. A. 1%
8. B. 2%
9. C. 3%
10. D. 1/2 of 1%
11. 3. The haircut percentage for a 20-year municipal bond is:
12. A. Higher than the percentage for 20-year Treasury bonds
13. B. Higher than the haircut percentage for nonconvertible corporate debt
14. C. The same a convertible debt
15. D. 3%
16. 4. Which of the following is an allowable asset for the purpose of calculating net capital?
17. A. Computer hardware
18. B. Unsecured notes receivable
19. C. Borrowed stock
20. D. Real estate holdings
21. 5. A broker-dealer carries the account of a specialist on the New York Stock Exchange having $11 million in equity collateral. The account contains $40 million in long positions and $10 million in short positions. What is the broker-dealer’s required haircut for this account?
22. A. $4.5 million
23. B. $10 million
24. C. $3 million
25. D. $2 million

Answers

1. 1. D. The haircut percentage for U.S. Treasury bonds and notes depends on the maturity of the issue. For notes that mature in less than three months from issuance, there is no haircut. For notes that mature between six and nine months, the haircut is 3/4%. For notes that mature between 9 and 12 months, the haircut is 1%.
2. 2. B. The haircut percentage for money market funds is 2%.
3. 3. A. Municipal bonds generally are a riskier investment than Treasury bonds having the same maturity and less risky than either nonconvertible corporate debt or convertible debt. It stands to reason