April Study Question of the Month

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Submit your answer to info@solomonexamprep.com to be entered to win a $20 Starbucks gift card.

Question

 

 

 

 

 

 

When inherited, the basis of a depreciated asset is?
 
A. Stepped up
B. Stepped down
C. Carried over
D. Carried under
 

March Study Question of the Month

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Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.

Question

 

 

 

 

 

 

With mutual fund A shares, the price an investor pays is referred to as:
 
A. NAV
B. POP
C. ROA
D. LOI
 
Answer: B. Mutual fund A shares typically charge a front-end sales charge, also called a load, which is a percentage of the investment in the mutual fund. The front-end sales charge or load is included in the price per share an investor pays. The current share price of a mutual fund is referred to as the net asset value, or NAV. The share price including any sales charge is referred to as the public offering price, or POP. For example, a fund with a NAV of $15 and a 5% front-end load has a POP of $15.79. That is calculated by dividing the $15 NAV by .95 (1 minus the 5% load). ROA refers to rights of accumulation and LOI refers to letter of intent. Both ROA and LOI are ways investors can get a volume discount on the price of load mutual fund shares.

February Study Question of the Month

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Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.

Question

 

 

 

 

 

 

Spock is an adviser who takes great pride in his use of logic when making investment recommendations.  Which of the following investment vehicles would he be least likely to recommend for a client’s IRA?
 
A. Corporate bonds
B. Growth stocks
C. Municipal bonds
D. REITs
 
Answer: C. Having municipals in an IRA is allowed, but it would not be the most logical investment choice.  That is because the tax advantage associated with municipal bonds is wasted in a tax-deferred account like an IRA.

January Study Question of the Month

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Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.

Question

Relevant to the Series 7.

 

 

 

 

 

Cassie gives her nephew Frank 10 shares of Hathshire Berkaway as a college graduation present. Cassie purchased the shares five years ago at $1,000, and their fair market value is $1,500 at the time of the gift. Frank holds the shares for one year, then sells them at $2,000. What is Frank’s cost basis and holding period?
 
A. $10,000; one year
B. $10,000; six years
C. $15,000; one year
D. $15,000; six years
 
Answer: B. When someone gives securities as a gift to another individual, the recipient’s cost basis is the lower of (1) the giver’s cost basis or (2) the fair market value at the time of the gift. So Frank’s cost basis is Cassie’s purchase price of $10,000 ($1,000 x 10 shares). The giver’s holding period will correspond to cost basis. So Frank’s holding period starts from the date of Cassie’s purchase, six years before Frank sells the shares.

December Study Question of the Month

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Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.

Question

Relevant to the SIE.

Henry buys shares of ABC in an initial public offering.  Two months later he sells the shares to James.  Two months later James sells the shares to Carrie. Which of the following is true?
 
A. Henry’s sale to James is a primary market transaction, while James’s sale to Carrie is a secondary market transaction
B. Both Henry’s sale to James and James’s sale to Carrie are primary market transactions
C. Henry’s sale to James is a primary market transaction, while James’s sale to Carrie is a follow-on offering

D. Both Henry’s sale to James and James’s sale to Carrie are secondary market transactions

Answer: D. When an investor buys shares in an IPO from the issuer, the purchase is a primary market transaction.  After that, whenever sales of the security are traded from investor to investor, and not from the issuer to an investor, the sales take place in the secondary market.  Thus, while Henry’s initial purchase is a primary market transaction, his sale to James and then James’ sale to Carrie are both secondary market transactions.

November Study Question of the Month

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Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.

Question

Relevant to the Series 50Series 51, Series 52, and Series 53.

 

 

 

 

 

A municipal finance professional decides to donate his time to a municipal official’s campaign. He donates his time outside of work hours. Which of the following is true?
 
A. This would not be considered a contribution under G-37, and would not need to be disclosed and would not trigger the ban
B. This is considered a contribution that will need to be reported and may trigger the ban
C. This will need to be disclosed by the dealer, but it would not trigger the ban

D. This is considered a contribution that may trigger the ban, but will not need to be reported

Answer: A. An employee of a dealer generally can donate his or her time to a municipal official’s campaign without it being considered a contribution to the official, as long as the employee is volunteering his or her time during non-work hours, or is using previously accrued vacation time or the dealer is not otherwise paying the employee’s salary (e.g., an unpaid leave of absence). Because the volunteering takes place outside of work hours, it would not be considered a contribution and will not trigger the ban or need to be disclosed.

October Study Question of the Month

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Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.

Question

Relevant to the Series 7Series 62, Series 65Series 79, Series 82, and Series 99.

 

 

 

 

 

What is the holding period for restricted securities issued by a company that files reports with the SEC?
 
A. Six months
B. Nine months
C. Twelve months

D. Securities issued by a company that files with the SEC are never restricted

Answer: A. Rule 144 requires purchasers of restricted securities to hold them for a certain amount of time before they sell them. If the issuer is a company that files reports with the SEC, the holding period is six months. If the issuer is a non-reporting company, the holding period is 12 months.

September Study Question of the Month

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Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.

Question

Relevant to the Series 62, Series 79, and Series 82.

 

 

 

 

 

Which of the following is an advantage of a 506(b) offering?
 
A. Sold shares are not restricted
B. It may be advertised to the public because it is considered a public offering
C. Instead of a prospectus, it may use a briefer document called an offering circular

D. It has no dollar limit

Answer: D. A private placement offering under Regulation D, Rule 506(b) has no dollar limit. The other three responses are advantages of Regulation A offerings.

August Study Question of the Month

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Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.

Question

Relevant to the Series 6Series 7, Series 24, Series 26Series 62, Series 79Series 82, and Series 99.

 

 

 

 

 

Which of these records about your customer Doug is your firm required to retain for five years?
 
A. Doug’s customer ledger
B. A SAR you filed on Doug
C. A complaint Doug filed about you

D. A confirmation of one of Doug’s trades

Answer: B. The general tier of recordkeeping is three years, six years, and lifetime, although there are some records with retention periods of four or five years. Additionally, the firm must keep most records easily accessible for the first two years.

Customer ledgers fall in the six-year tier, Suspicious Activity Reports (SARs) fall in the five-year tier, customer complaints fall in the four-year tier, and trade confirmations fall in the three-year tier.

July Study Question of the Month

Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card. Continue reading

Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.

Question

Relevant to the Series 6Series 7Series 62Series 65,  Series 66,  Series 82, and Series 99.

 

 

 

 

 

Bob owns convertible preferred stock in BigCo. Which of the following is a taxable event for Bob?
 
A. He converts it into common stock
B. Due to a corporate restructuring, he receives additional shares
C. He receives a cash dividend that is less than the amount that the share price declined last quarter

D. Due to a corporate merger, his shares are exchanged for shares in LargerCo

Answer: C. Receiving a dividend (even a qualified dividend) is a taxable event. When a company merges with another company, it may give its shareholders stock in a new company in exchange for the stock they currently hold. This is usually not a taxable event, meaning the shareholder does not have to pay taxes on the new shares at the time of the exchange. Moreover, if the company gives shares of common or preferred stock to shareholders because of a corporate restructuring or bankruptcy, this is also not a taxable event. Additionally, the conversion of convertible preferred stock (or bonds) to common stock is not a taxable event.