Tag: series 82

Study Question of the Week: June 4, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 24, Series 26, 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 7, Series 24, Series 26, Series 62, and Series 82): 

FINRA considers institutional communications to be written communications sent solely to institutional investors. FINRA considers an “institutional investor“ to be any of the following except:

Answers:

A. An individual with total assets of $55 million

B. An insurance company

C. A corporation with net assets of $20 million

D. A qualified plan that has 100 participants

Correct Answer: C

Rationale: Institutional communications are written communications sent to institutional investors. FINRA Rule 2210, Communication with the Public, defines “institutional investor“ as any of the following:

(A) a bank,savings and loan association, insurance company, or registered investment company;

(B) an investment adviser registered either with the Securities and Exchange Commission under Section 203 of the Investment Advisers Act of 1940 or with a state securities commission (or any agency or office performing like functions);

(C) any other entity (whether a natural person, corporation, partnership, trust, or otherwise) with total assets of at least $50 million;

(D) governmental entity or subdivision thereof;

(E) employee benefit plan, or multiple employee benefit plans offered to employees of the same employer, that meet the requirements of Section 403(b) or Section 457 of the Internal Revenue Code and in the aggregate have at least 100 participants, but does not include any participant of such plans;

(F) qualified plan, as defined in the Exchange Act, or multiple qualified plans offered to employees of the same employer,that in the aggregate have at least 100 participants, but does not include any participant of such plans;

(G) member or registered person of such a member; and

(H) person acting solely on behalf of any such institutional investor.

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Study Question of the Week: May 15, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 24, Series 62, Series 79, 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 7, Series 24, Series 62, Series 79, and Series 82): 

Placement agents for private placements almost always engage in a __________ commitment with the issuer.

Answers:

A. firm

B. best efforts

C. shelf

D. primary

Correct Answer: B

Rationale: Placement agents for private placements almost always engage in a best efforts commitment with the issuer.

 

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

Study Question of the Week: May 1, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 62, Series 65, Series 66, Series 79, 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 6, Series 7, Series 62, Series 65, Series 66, Series 79, and Series 82):

Which of the following Treasury securities does not pay interest semi-annually?

Answers:

A. T-bills

B. T-notes

C. T-bonds

D. TIPS

Correct Answer: A

Rationale: Treasury bills, or T-bills are issued at a discount from the par value (face value) and the interest payment is paid one time, on maturity, and it is the difference between the par value and the purchase price. T-notes, T-bonds and TIPS pay interest semi-annually (twice a year).

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

Study Question of the Week: April 24, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, 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.

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

Ten years ago, Janice bought 100 shares of Humdrum Inc. at $70 per share.  The price of the stock has declined and this year she decides to sell the stock at $25.  A week after she sells the stock, Humdrum announces an exciting new product called Humdinger and Janice decides Humdrum is a stock she wants to own after all and she buys 100 new shares of Humdrum at $30.  Which of the following is true?

Answers:

A. Janice can claim a $45 per share loss on her tax return

B. Janice can claim a $40 per share loss on her tax return

C. The basis of the new shares will be $75

D. The basis of the new shares will be $55

Correct Answer: C

Rationale: According to IRS rules, if you sell a security at a loss and then buy back the same securities within 30 days, any loss on the sale of the original securities is disallowed. This is called a Wash Sale. However, you are permitted to capture the loss by adding it to the basis of the new shares. Therefore, the basis of the new shares will be $30 (purchase price) + $45 (per share loss on sale of old shares) = $75.

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Study Question of the Week: April 17, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 62, Series 65, Series 79, Series 82, and Series 99. –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 7, Series 62, Series 65, Series 79, Series 82, and Series 99):

A reverse stock split:

I. Reduces the value of shareholder equity

II. Requires SEC approval

III. May be done to maintain an exchange listing and to attract institutional investors

IV. Can result in fewer shareholders

Answers:

A. II, III

B. III, IV

C. I, II

D. I, IV

Correct Answer: B. III, IV

Rationale: A reverse stock split is the opposite of a stock split, so instead of ending up with more shares in the case of a stock split, in a reverse stock split shareholders end up with fewer shares. For example, in a 1 for 3 reverse split, shareholders receive one new share for three old shares, but the value of each share increases proportionately resulting in an increase in the value of each share but no change in the value of shareholder equity. The increase in the share price is a primary reason for reverse stock splits; a common reason for the reverse split is to keep a share price above some exchange-required minimum share price, such as $1. A higher share price is also desirable because it can broaden the base of potential investors to include institutions which may be prohibited from purchasing low-priced stocks. Stock splits are governed by state law and by company bylaws, they do not require SEC approval. Reverse stock splits that involve large reductions in the number of shares, for example a 1 for 100 reverse split, may result in shareholders not having enough of the old shares to exchange in return for the new shares, when this happens the shareholders are paid cash for their shares. This results in an overall reduction in the number of shareholders.

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

Study Question of the Week: March 27, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 62, Series 65, 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 6, Series 7,  Series 62, Series 65, and Series 82):

“Phantom tax exposure” is a characteristic of:

I. T-bonds

II. Treasury STRIPS

III. Zero-coupon bonds

IV. Municipal revenue bonds

Answers:

A. I and III

B. I and II

C. II and III

D. II and IV

Correct Answer: C

Rationale: Treasury STRIPS, which are sold at a discount and don’t pay annual interest to owners, are a type of zero coupon bond. Zeroes are taxed each year based upon the imputed annual value of the cumulative interest earned. “Phantom tax exposure” means you pay taxes each year on interest you don’t receive. Zeros do not pay interest each year, instead interest is paid in a lump sum at maturity. For this reason, investors in zeros do not have to worry about the risk of having to reinvest their interest payments at a lower rate (reinvestment risk).

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

Study Question of the Week: March 7, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 62, Series 79, 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 6, Series 7, Series 62, Series 79, and Series 82):

Which of the following are not true of CMOs?

Answers:

a. CMOs tend to be more sensitive to interest rates than most fixed income securities

b. Most CMOs protect against both prepayment risk and extension risk

c. A decrease in interest rates may lead to CMO investors getting their principal payments sooner than expected

d. CMOs can be issued as a government agency CMO or as a private-label CMO

Correct Answer: B

Rationale: A sequential pay CMO is the most basic of CMO structures, also known as a plain vanilla offering. Each tranche receives regular interest payments, but principal payments are made to the first tranche alone until it is completely retired, after which principal payments are applied to the next tranche until it is fully retired, and so on until the last tranche is retired in sequence. While most CMOs protect against prepayment risk better than a traditional mortgage backed security, they are still subject to prepayment risk and extension risk. CMOs are also more sensitive to interest rate changes than other fixed income securities because when interest rates fall, prepayment speeds usually accelerate, and CMO investors may receive their principal back sooner than they expected. They then have to reinvest this principal at lower interest rates.

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

Study Question of the Week: February 27, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 24, Series 62, Series 79, 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 24, Series 62, Series 79, and Series 82):

A company may file an 8-K after the closing of a PIPE transaction for all of the following reasons except?

Answers:

A. To alert investors of the possible dilutive effects of the transaction

B.  To disclose any material non-public information that was revealed to the PIPE investors so that they are not precluded from trading in the stock after the close of the deal

C.  To comply with Regulation S-X

D. To comply with Regulation FD

*Fun fact: only 55% of people get this question right

Corrrect Answer: C

Rationale: PIPE (Private Investment in Public Equity) transactions are when public companies raise funds by selling shares in a private offering. Because a PIPE transaction is a private offering, the company does not need to file a registration statement before the deal closes. Most companies typically register the offering after the deal closes, however, so that investors will not be subject to resale restrictions.
After the PIPE transaction, a company typically files an 8-K form to alert their shareholders, the public, and the SEC of the transaction. This serves to inform the shareholders that the PIPE transaction may dilute their current holdings. A more common reason to file an 8-K is to comply with Regulation FD (Fair Disclosure) which requires a company to file an 8-K if the company reveals material, non-public information to people who may trade on the information in the future. A PIPE transaction may require this disclosure because a PIPE transaction is material, non-public information and PIPE investors are privy to this information before the public. A company will usually get investors to agree to keep the information confidential until the close of the transaction, but then an 8-K is filed so that PIPE investors are not precluded from trading in the stock after the close of the deal. Many PIPE investors will require assurance that the 8-K will be filed after the transaction closes before they will agree to invest.

SEC Regulation S-X states that financial statements must be filed with a registration statement and sets forth guidelines as to the type and format of those statements.

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Study Question of the Week: February 19, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 79, Series 82, and Series 99. –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 6, Series 7, Series 24, Series 26, Series 62, Series 79, Series 82, and Series 99):

Richard had just returned to the States from his third tour of duty in Afghanistan. After relaxing with family and friends for a couple of months, he re-registers with his old employer where he had worked as a broker. In the meantime his license:

Answers:

A. Expired after his second year-long tour of duty

B. Expired ninety days after completing his second tour of duty

C. Remains current

D. Expires in 30 days unless Richard successfully completes his continuing education program

Correct Answer: C

Rationale: FINRA provides licensing relief to registered representatives who are called into or volunteer for active military service. Richard’s license will expire ninety days after completion of active service, unless he re-registers with a member firm before that time. Since he took only two months off before re-registering, Richard’s license is still current and will remain so.

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

Study Question of the Week: January 24, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 62, Series 65, 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 6, Series 7, Series 62, Series 65, and Series 82):

“Phantom tax exposure“ is a characteristic of:

I.  T-bonds

II.  Treasury STRIPS

III.  Zero-coupon bonds

IV.  Municipal revenue bonds

 Answers:

A. I, II and III

B. I and IV

C. II and III

D. None of the choices listed

Correct Answer: C. II and III

Rationale:  Treasury STRIPS, which are sold at a discount and don’t pay annual interest to owners, are a type of zero coupon bond.  Zeroes are taxed each year based upon the imputed annual value of the cumulative interest earned.  “Phantom tax exposure“ means you pay taxes each year on interest you don’t receive.  The trade-off is that you avoid reinvestment risk along the way.

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