1. A client has placed an order through a registered representative to buy 100,000 shares of ABC stock at $35, at the RR’s suggestion, the order was submitted as AON. Why was the order done this way?
A. To inform the floor broker the order must be executed entirely by the end of the business day.
B. To be sure that the order, if not executed immediately, is canceled.
C. To save on commission.
D. As a note to the specialist to execute the order without regard to priority
2. A registered representative has a customer with a large long position in ABC stock. After reading the financial news, the RR is concerned about a retracement. Which of the following strategies would best serve to protect the investor’s portfolio of ABC.
A. Buy puts on ABC
B. Sell calls on ABC
C. Sell puts on ABC
D. Buy calls on ABC
3. A customer’s margin account is as follows:
· Long 500 shares PDQ @ 50
· Short 200 shares FBN @ 30
· Credit balance = $14,000
· Debit balance = $15,000
What is the customers combined equity in her account?
4. A customer’s long margin account is as follows:
CMV – $55,000
DR – $30,000
SMA – $5,000
After the customer withdraws the $5,000 SMA, this account is:
B. Subject to a maintenance call
C. Properly margined according to Reg. “T.”
5. One of the simplest definitions of inflation may be stated as:
A. Low confidence and flat yield curves.
B. Too few dollars chasing too many goods.
C. Too many dollars chasing too few goods
D. Declining prices and interest rates.
6. When a limited partnership dissolves, which of the following is the order in which assets are distributed?
I. General Partners
II. Limited Partners
III. Secured creditors
IV. General creditors
A. I, III, IV, II
B. III, IV, II, I
C. IV, I, III, II
D. II, I, IV, III
7. Mr. Smith and Mr. Brown are business partners. They have a common account with the brokerage firm of JTP. During a trading day, Mr. Brown calls the RR who handles the account and directs him to sell 1,000 shares of FBN stock immediately at the market. Which of the following actions must the RR take?
A. Execute the trade as quickly and accurately as possible
B. Clear trades in the account with the compliance department
C. Clear the trade with the supervising principal
D. Check with Mr. Smith before executing the order
An All-Or-None (AON) order must be filled in its entirety or not at all. It differs from an Immediate-Or-Cancel or a Fill-Or-Kill, order in that it is not automatically canceled if not executed at once. If the entire order is executed with one transaction, the customer will save money on commissions compared with piecemeal execution.
The RR is concerned that the price of GBS will retrace. By buying puts, the investor protects their position and fixed their selling price for the term of the option, called a long hedge.
In this question the customer’s full account information is given so we just follow both formulas for account equity and add the result. Long account: Current market value – debit
= equity ($25,000-15,000 = $10,000). Short account: Credit – Market value short = equity
($14,000-6,000 = $8,000). For the total combined equity, add the two
CMV-DR = EQ. With Reg. “T” at 50%, the EQ in the account should be $27,500. The
account equity is still above the SRO minimum maintenance level, but is below the Reg.
This is a classic definition of inflation. When spending increases relative to the supply of
goods, prices rise along with interest rates. Mild inflation is associated with economic
growth and is typically matched by a growing stock market.
When a limited partnership dissolves, the secured creditors are paid before general
creditors. The limited partners, who contributed most of the funds, are paid before the general partners.
The account is a tenants in common account. Any person who has signed the account
documents may make trades without reference to other parties. These accounts do not have
the flexibility of a JTWROS account in case of the death of one of the parties.
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