Study Question of the Week: December 6, 2012 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 79, Series 24, Series 62 and Series 82. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Question (Relevant to the Series 79, Series 24, Series 62 and Series 82):

An individual or group acting together must file a Schedule 13D form when:

Answers:

A: their stockholdings reach 5% of a corporation’s outstanding shares of common stock

B: their stockholdings reach 10% of a corporation’s outstanding shares of common stock

C: their stockholdings reach 20% of a corporation’s outstanding shares of common stock

D: their stockholdings reach 50% of a corporation’s outstanding shares of common stock

Correct Answer: A

Rationale: Section 13(d) requires an individual or group acting together to file a 13D form when their stockholdings reach 5% of a corporation’s outstanding shares of common stock. This rule gives a corporation that may be the target of an acquisition fair warning in advance. Schedule 13D requires the group to disclose the number of shares owned, background information on the individual filing the form, the purpose of the transaction, and the source of the funds to finance the acquisition of the shares. Schedule 13D must be filed within 10 days of the acquisition of the stock.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: November 27, 2012 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 62, and Series 82. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available. Be sure to submit your answers in the comments section below.

Question (Relevant to the Series 7, Series 62, and Series 82):

ABC Corporation 6% preferred stock is convertible at $20. ABC Common trades at $25/share. What is the parity price of ABC preferred stock?

Answers:

A: $30

B: $50

C: $125

D: $500

Correct Answer: C

Rationale: First we must take the convertible price and divide it into the par value for the preferred stock to find out how many shares of common stock would be received for one share of preferred stock. $100/$20 = 5 shares of common for each share of preferred. Then we must multiple the number of common shares times the price of the common stock. 5 shares * $25/share = $125/share. The parity price of ABC preferred is $125/share.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: November 8, 2012 Edition

This week’s exam study question from the Solomon Online Exam Simulator question database is now available. This week’s exam question is relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 65, Series 66, and Series 82. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available. Be sure to submit your answers in the comments section below.

Question (Relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 65, Series 66, and Series 82):

A couple has just had a baby and they want to start saving for college. What option does NOT offer the opportunity for their investment to grow free of federal taxes?

Answers:

A: Education Savings Account

B: UGMA/UTMA Account

C: 529 College Savings Plan

D: 529 Prepaid Tuition Plan

ANSWER & RATIONALE

Correct Answer: B

Rationale: Unlike the other options, UGMA/UTMA (Uniform Gifts to Minors Act/Uniform Transfers to Minors Act) accounts are subject to federal income and capital gains taxes.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

ANSWER – Study Question of the Week: October 23, 2012 Edition

As a follow up to yesterday’s licensing exam study question, here is your question PLUS answer and rationale. Relevant to Series 6, Series 7, Series 65, Series 66, Series 24, Series 26 and Series 99. Continue reading

As a follow up to yesterday’s licensing exam study question, here is your question PLUS answer and rationale:

Question (Relevant to Series 6, Series 7, Series 65, Series 66, Series 24, Series 26 and Series 99):

Which of the following is true of UGMA/UTMA accounts?

I. Only family members may contribute to a UGMA/UTMA
II. Annual contribution limit of $13,000 per year, per child
III. Assets may only be used for education expenses
IV. Earnings reported under adult custodian’s tax identification

Answers:

A: I, II

B: III, IV

C: II, III

D: None of the choices listed

Correct Answer: D

Rationale: Anyone may contribute to a Uniform Gifts to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA) account and there are no contribution limits. Assets in UGMA/UTMA accounts may be used for any purpose and earnings are reported on the minor’s social security account, not the custodian’s.

*Questions featured in the weekly study question series are sampled from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: October 23, 2012 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available (Relevant to Series 6, 7, 65, 66, 24, 26 and 99). Be sure to submit your answers in the comments section and check back tomorrow for the correct answer and rationale. Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available. Be sure to submit your answers in the comments section and check back tomorrow for the correct answer and rationale. Happy studying!

Question (Relevant to Series 6, Series 7, Series 65, Series 66, Series 24, Series 26 and Series 99):

Which of the following is true of UGMA/UTMA accounts?

I. Only family members may contribute to a UGMA/UTMA
II. Annual contribution limit of $13,000 per year, per child
III. Assets may only be used for education expenses
IV. Earnings reported under adult custodian’s tax identification

Answers:

A: I, II

B: III, IV

C: II, III

D: None of the choices listed

ANSWER: Study Question of the Week (October 11, 2012 Edition)

As a follow up to yesterday’s licensing exam study question, here is your question PLUS answer and rationale (Relevant to the Series 7, Series 65, Series 66, Series 24 and Series 62). Continue reading

As a follow up to yesterday’s licensing exam study question, here is your question PLUS answer and rationale:

Question (Relevant to the Series 7, Series 65, Series 66, Series 24 and Series 62):

Todd finally hit the nail on the head when he sold short shares of Widget Corporation. He doesn’t see widgets coming around anytime soon, but would like to protect his profits in case the stock goes against him. What type of order would Todd most likely enter?

Answers:

A: Buy stop

B: Sell Stop

C: Market

D: FOK

Correct Answer: A

Rationale: Buy stop orders are commonly used to limit a loss or protect a profit on short sales. Because shares are sold to open a short position, they would need to be bought back in order to close the position. A stop order triggers a sale or purchase if the stock reaches a certain price. In this case, Todd would place the order above the current market and if the stock price increased to his ‘stop price,’ the order would become a market order and close his position. The order would still allow for Todd to potentially profit if the stock goes down. If a market order was entered, the stock would be immediately bought at the next available ask price. A Fill or Kill (FOK) is an order distinction used for limit orders which requires that all of the order be executed immediately and completely or cancelled.

*Questions featured in the weekly study question series are sampled from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: October 10, 2012 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available (Relevant to the Series 7, Series 65, Series 66, Series 24 and Series 62). Be sure to submit your answers in the comments section and check back tomorrow for the correct answer and rationale. Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available. Be sure to submit your answers in the comments section and check back tomorrow for the correct answer and rationale. Happy studying!

Question (Relevant to the Series 7, Series 65, Series 66, Series 24 and Series 62):

Todd finally hit the nail on the head when he sold short shares of Widget Corporation. He doesn’t see widgets coming around anytime soon, but would like to protect his profits in case the stock goes against him. What type of order would Todd most likely enter?

Answers:

A: Buy stop

B: Sell Stop

C: Market

D: FOK

 

Answer found here.

ANSWER–Study Question of the Week: October 1, 2012 Edition

As a follow up to yesterday’s licensing exam study question (Relevant to Series 65, Series 66, Series 7, and Series 79), here is your question PLUS answer and rationale: Continue reading

As a follow up to yesterday’s licensing exam study question, here is your question PLUS answer and rationale:

Question (Relevant to Series 65, Series 66, Series 7, and Series 79):

Given the following assumptions for stock ABC, what is its expected return using the Capital Asset Pricing Model (CAPM)?

Assumptions: Risk Free Rate: 1%; Expected Return on general stock market: 7%; Beta: 1.; Sharpe Ratio: 2.

Answers:

A. 10%

B. 13%

C. 11.5%

D. 15%

Correct Answer: A

Rationale: The formula for the Capital Asset Pricing Model (CAPM) is given by the following: Return on Stock = Risk Free Rate + Beta of Stock x (Return on Market – Risk Free Rate). Plugging in for Stock ABC gives Return on Stock ABC = 1% + 1.5 x (7% – 1%) = 10%. Note the Sharpe Ratio is not used in the CAPM formula.

*Questions featured in the weekly study question series are sampled from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: October 1, 2012 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available (Relevant to Series 65, Series 66, Series 7, and Series 79). Be sure to submit your answers in the comments section and check back tomorrow for the correct answer and rationale! Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available. Be sure to submit your answers in the comments section and check back tomorrow for the correct answer and rationale!

Happy studying!

Question (Relevant to Series 65, Series 66, Series 7, and Series 79): Given the following assumptions for stock ABC, what is its expected return using the Capital Asset Pricing Model (CAPM)?

Risk Free Rate: 1%; Expected Return on general stock market: 7%; Beta: 1.;, Sharpe Ratio: 2.

Answers:

A. 10%

B. 13%

C. 11.5%

D. 15%

ANSWER–Study Question of the Week: September 19, 2012 Edition

As a follow up to yesterday’s licensing exam study question, here is your question PLUS answer and rationale (Relevant to Series 7, Series 79, Series 24, Series 62, Series 99, and Series 82). Continue reading

As a follow up to yesterday’s licensing exam study question, here is your question PLUS answer and rationale:

Question (Relevant to Series 7, Series 79, Series 24, Series 62, Series 99, and Series 82):

Before allowing a customer to buy shares in an IPO, the member firm must receive a representation that the account is not restricted by the account owner. How can this form be obtained initially?
I. Negative consent letter
II. Positive affirmation letter

Answers:

A: I

B: II

C: Either I or II

D: Neither I nor II

Correct Answer: B

Rationale: Before allowing a customer to buy shares in an IPO, the member firm must receive a representation declaring that the account is not restricted by the account owner. The firm must receive a positive affirmation letter in which the customer states in writing that the account is not restricted. After the initial verification is obtained, annual verifications may be obtained through a negative consent letter. A negative consent letter is a letter that states that the person is not restricted unless they inform the firm otherwise.

*Questions featured in the weekly study question series are sampled from Solomon’s industry-leading Online Exam Simulator.