Chapter 4 Practice Questions
1.The minimum net capital requirement for a broker-dealer that carries customer accounts and holds securities for its customers is:
A.$50,000
B.$100,000
C.$250,000
D.$500,000
2.What is the minimum net capital requirement for a broker or dealer that carries accounts but does not hold customer funds or securities?
A.$10,000
B.$50,000
C.$100,000
D.$250,000
3.The aggregate indebtedness standard requires that no broker or dealer may permit its aggregate indebtedness to all other persons to exceed what percent of its net capital?
A.100%
B.150%
C.1,000%
D.1,500%
4.A broker or dealer with respect to the purchase, sale, and redemption of redeemable shares of registered investment companies must maintain net capital of:
A.$30,000
B.$10,000
C.$20,000
D.$25,000
5.Which of the following is considered an allowable asset when calculating net capital?
A.Real estate
B.Goodwill
C.Furniture and fixtures
D.Securities holdings
6.DEF Brokers has tentative net capital equal to $18 million. The common stock it carries across its customer accounts consists of $20 million in long positions and $5 million short. Assuming this is its entire securities portfolio, what is the company’s net capital?
A.$16 million
B.$15 million
C.$16.5 million
D.$13.5 million
7.The ratio of aggregate indebtedness to net capital of an established firm cannot be greater than:
A.1:1
B.10:1
C.12:1
D.15:1
8.The ratio of aggregate indebtedness to net capital of a first-year firm cannot be greater than:
A.1:1
B.8:1
C.12:1
D.15:1
9.XYZ Brokerage Firm holds a large amount of Corporation A securities. It holds $175,000 in Corporation A common stock. Its tentative net capital is $1.5 million. When calculating net capital, how much of a haircut will the firm need to take on the value of the Corporation A securities because of an undue concentration (not including the regular haircut for securities)?
A.$0
B.$3,750
C.$25,000
D.$26,250
10.Broker-dea