Study Question

Study Question of the Month – December

This month’s study question from the Solomon Online Exam Simulator question database is now available. Submit your answer for a chance to win a $10 Starbucks gift card! Relevant to the Series 7, Series 24, Series 62, Series 65, Series 66, and Series 79. –ANSWER POSTED– Continue reading

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

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

Question (Relevant to the Series 7, Series 24, Series 62, Series 65, Series 66, and Series 79 ):

A popular type of business structure that does not limit an owner’s personal liability for the actions and/or debts of the entity and does not have to pay corporate taxes on profits is a:

Answers:

A. LLC

B. C corporation

C. S corporation

D. Sole proprietorship

Correct Answer: D. Sole proprietorship

Rationale: LLCs, S Corporations and C Corporations all offer some form of limited liability to their owners. LLCs and S Corporations are so-called “pass through“ entities and do not pay taxes on profits at the entity level (as opposed to C Corporations which do). The correct answer to this question is a sole proprietorship. A sole proprietorship does not offer an owner any liability protection and is not required to file corporate income tax returns.

Congratulations! This month’s winner is Jeffrey B.

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

Study Question of the Week: August 14, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, 51, 52, 53, 62, 82, and 99. –ANSWER POSTED– Continue reading

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

Study ? of the Week

Question (Relevant to the Series 7, Series 51, Series 52, Series 53, Series 62, Series 82, and Series 99):

When money is regularly put into an escrow account in order to redeem the bonds before maturity this is called:

Answers:

A. A sinking fund redemption

B. Advance refunding

C. Defeasement

D. A make whole provision

Correct Answer: A. A sinking fund redemption

Rationale: A sinking fund redemption requires the issuer to set money aside regularly in a reserve account for the redemption of the bonds before maturity.

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

Study Question of the Week: August 6, 2014 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 99. –ANSWER POSTED– Continue reading

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

Study ? of the Week

Question (Relevant to the Series 6, Series 7, Series 62, Series 65, Series 66, and Series 99):

A client wants to open a custodial IRA account for his minor daughter who has earned a couple thousand dollars babysitting. Which of the following would be the best choice?

Answers:

A. Traditional IRA

B. Roth IRA

C. SIMPLE IRA

D. SEP IRA

Correct Answer: B. Roth IRA

Rationale: SEP and Simple IRAs are for small businesses. A traditional IRA would work but since the client’s daughter doesn’t have enough income to take advantage of the tax deduction benefit from a traditional IRA, the Roth IRA is the best choice since it will permit her to eventually withdraw tax-free.

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

Study Question of the Week: July 23, 2014 Edition

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

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

Study ? of the Week

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

The IRS uses the FIFO method for taxing:

Answers:

A. Withdrawals from a life insurance contract

B. Withdrawals in excess of the basis in a variable annuity contract

C. Loans from a life insurance contract

D. None of the choices listed

Correct Answer: A. Withdrawals from a life insurance contract

Rationale: Life insurance enjoys “first in, first out“ treatment from the IRS. Annuities are taxed on a LIFO basis, and money borrowed from a life insurance contract is not taxed at all.

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

Study Question of the Week: July 9, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, 51, 52, 53, 62, 79, 82, and 99. –ANSWER POSTED– Continue reading

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

Study ? of the Week

Question (Relevant to the Series 7, Series 51, Series 52, Series 53, Series 62, Series 79, Series 82, and Series 99):

When new bonds are issued with the purpose of using the proceeds to pay off older bonds, it is called?

Answers:

A. Refunding

B. Defeasement

C. A sinking fund redemption

D. A bond SWAP

Correct Answer: A. Refunding

Rationale: A bond refunding is the replacement of existing bonds with new “refunding“ bonds. The issuer of refunding bonds often seeks to lower its interest payments by paying off its previously issued (refunded) bonds with newly issued bonds that pay interest at a lower rate. Another reason to refund existing bonds may be to release the issuer from legal covenants or restrictions in the original indenture.

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

Study Question of the Week: July 2, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 51, Series 52, Series 53, and Series 62. –ANSWER POSTED– Continue reading

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

Study ? of the Week

Question (Relevant to the Series 7, Series 51, Series 52, Series 53, and Series 62):

A flat bond is a bond that:

Answers:

A. Has a fixed interest rate

B. Is quoted in terms of its yield-to-maturity

C. Has no call provision

D. Does not trade with accrued interest

Correct Answer: D. Does not trade with accrued interest

Rationale: Bonds are quoted at a flat price, also called a clean price, meaning that accrued interest is not factored into the quotation. Bonds generally trade at a “dirty” price, with accrued interest factored in. Sometimes bonds trade flat, however, meaning that the bond carries no accrued interest. Bonds in default and zero coupon bonds are two examples of bonds that trade flat.

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

Study Question of the Week: June 18, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 52, and Series 65. –ANSWER POSTED– Continue reading

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

Study ? of the Week

Question (Relevant to the Series 7, Series 52, and Series 65):

Jenny lives in Minnesota. She is comparing a Washington state municipal bond that pays 5% to similar corporate bonds. She has a federal tax rate of 20% and a State rate of 4%. What yield will the corporate bond have to pay to be equivalent to the municipal bond?

Answers:

A. 4%

B. 5%

C. 6.25%

D. 6.58%

Correct Answer: C. 6.25%

Rationale: Because Jenny lives in Minnesota, the interest on her municipal bond will be tax-exempt at the federal level, but not at the state level. To calculate the tax-equivalent yield of a municipal bond, simply take the rate of the municipal bond and divide it by 1 minus the tax rate. So the tax equivalent yield = .05/(1-.20) = .0625 or 6.25%.

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

Study Question of the Week: June 4, 2014 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, and Series 82. –ANSWER POSTED– Continue reading

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

Study ? of the Week

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

Under Rule 144, which of the following persons would be subject to holding period limits on a re-sale?

Answers:

A. A C.E.O who holds 10,000 shares of the publicly traded company he runs

B. A C.E.O who purchased 10,000 shares of restricted securities two years ago of the company that he runs

C. A person who is not an affiliate purchased 10,000 shares in a private placement 1 year ago

D. A person who is not an affiliate purchased 10,000 shares of a company’s stock 2 months ago from an affiliate of the company

Correct Answer: D. A person who is not an affiliate purchased 10,000 shares of a company’s stock 2 months ago from an affiliate of the company

Rationale: If a person purchases shares from an affiliate, the shares are considered restricted, even if they were not restricted in the affiliates’ hands and therefore subject to holding period limits. Holding period limits are 6 months for reporting companies and 1 year for non-reportng companies.

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

Study Question of the Week: May 28, 2014 Edition

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

Study ? of the Week

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

Which of the following is not exempt from the registration requirements of the Securities Act of 1933?

Answers:

A. State bonds

B. Insurance company variable annuities

C. Municipal bonds

D. Common carrier (e.g., railroad) securities

Correct Answer: B. Insurance company variable annuities

Rationale: State and municipal bonds are backed by the full faith of the respective governments. Common carrier securities are reviewed by the ICC. If variable annuities were not registered, no authority would have jurisdiction over them.

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

Study Question of the Week: May 21, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 52, and Series 53. –ANSWER POSTED– Continue reading

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

Study ? of the Week

Question (Relevant to the Series 7, Series 52, and Series 53):

The spread in a municipal underwriting is equal to:

Answers:

A. the manager’s fee plus the total takedown

B. the manager’s fee plus the additional takedown

C. the additional takedown plus the concession fee

D. the total takedown plus the additional takedown

Correct Answer: A. the manager’s fee plus the total takedown

Rationale: The spread consists of the manager’s fee plus the total takedown. The total takedown may be further broken down into the additional takedown and the concession fee.

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