Archive for July 2021

A corporation would repurchase its debt for all of the following reasons EXCEPT to:

A corporation would repurchase its debt for all of the following reasons EXCEPT to:



A. refinance at lower interest rates

B. increase its capitalization

C. increase the market value of its equity issues

D. reduce its sensitivity to earnings fluctuations due to cyclical conditions



Answer: B. Increase its capitalization

A corporation is preparing a registration statement for a new issue offering consisting of 300,000 new shares and 200,000 existing shares held by officers. The Public Offering Price is $30 per share. The spread taken by the underwriters is $2 per share. Which of the following will be changed as a result of the offering?

A corporation is preparing a registration statement for a new issue offering consisting of 300,000 new shares and 200,000 existing shares held by officers. The Public Offering Price is $30 per share. The spread taken by the underwriters is $2 per share. Which of the following will be changed as a result of the offering?



I Net working capital

II The number of outstanding shares

III Retained earnings (earned surplus)

IV Net worth



Answer: I, II, and IV

XYZ Company has 100,000,000 authorized common shares. 25,000,000 shares have been issued and another 10,000,000 shares are currently in registration. The sale of the 10,000,000 shares will result in all of the following EXCEPT a(n)

XYZ Company has 100,000,000 authorized common shares. 25,000,000 shares have been issued and another 10,000,000 shares are currently in registration. The sale of the 10,000,000 shares will result in all of the following EXCEPT a(n)



A. decrease in earnings per share

B. increase in net worth

C. decrease in net working capital

D. increase in the number of shares outstanding



Answer: C. Decrease in net working capital

A corporate issuer declares a reverse stock split. After the split is effected, which of the following statements are TRUE?

A corporate issuer declares a reverse stock split. After the split is effected, which of the following statements are TRUE?



I The market price of the corporation's shares will increase

II The market price of the corporation's shares will decrease

III The reported earnings per common share will increase

IV The reported earnings per common share will decrease



Answer: I and III

A company has reported operating income of $5,000,000. The bond interest expense for the year is $500,000 and principal repayments on bonds totaled $1,500,000. The company's debt service coverage ratio is:

A company has reported operating income of $5,000,000. The bond interest expense for the year is $500,000 and principal repayments on bonds totaled $1,500,000. The company's debt service coverage ratio is:



A. 10:1

B. 3.33:1

C. 2.5:1

D. 1:1



Answer: C. 2.5:1

Which of the following will affect the reported net income per share of a corporation?

Which of the following will affect the reported net income per share of a corporation?



I Decrease in the number of common shares outstanding

II Change in accounting method for valuing inventories

III Declaration of a common dividend

IV Discontinuance of operations of an operating division



Answer: I, II, and IV

All of the following terms are synonymous EXCEPT:

All of the following terms are synonymous EXCEPT:



A. capital in excess of par

B. capital surplus

C. additional paid in capital

D. retained earnings



Answer: D: retained earnings

Accelerated depreciation deductions:

Accelerated depreciation deductions:



I increase reported income in early years

II decrease reported income in early years

III increase reported expenses in early years

IV decrease reported expenses in early years



Answer: II and III

What is PDQ Corporation's Current Ratio?

PDQ Current Assets = 178,000,000

PDQ Current Liabilities = 97,000,000

What is PDQ Corporation's Current Ratio?



A. .67:1

B. 1:1

C. 1.84:1

D. 6.11:1



Answer: C: 1.84:1

All assets minus all liabilities equals:

All assets minus all liabilities equals:



A. net worth

B. net working capital

C. book value

D. net tangible assets



Answer: A: Net Worth

An increasing Consumer Confidence Index indicates that:

An increasing Consumer Confidence Index indicates that:



I consumers are confident in the overall economy

II consumers are not confident in the overall economy

III future spending is likely to increase

IV future spending is likely to fall



Answer: I and III

Which of the following statements are TRUE regarding the "help wanted" advertising index?

Which of the following statements are TRUE regarding the "help wanted" advertising index?



I If the number of advertisements is increasing, the economy is growing

II If the number of advertisements is increasing, the economy is contracting

III The index is a leading economic indicator

IV The index is a lagging economic indicator



Answer: I and III

Which of the following is a lagging economic indicator?

Which of the following is a lagging economic indicator?



A. Index of Industrial Production

B. Reported corporate profits

C. Standard and Poor's 500 Index

D. New consumer goods orders



Answer: B. Reported corporate profits

Which is considered to be a coincident economic indicator?

Which is considered to be a coincident economic indicator?



A. Stock market prices

B. Corporate profits

C. Index of industrial production

D. Orders for machinery



Answer: C. Index of industrial production

Which of the following is a leading economic indicator?

Which of the following is a leading economic indicator?



A. Personal Income

B. Employment Duration

C. Labor Cost Per Manufactured Unit

D. Contracts for plant and equipment



Answer: D. Contracts for plant and equipment

Which of the following statements are TRUE about the Federal Funds rate?

Which of the following statements are TRUE about the Federal Funds rate?



I The Federal Funds rate is set by the Federal Reserve and is the rate at which member banks can borrow reserves from the Fed

II Federal Reserve actions taken by the FOMC will influence the Federal Funds rate

III The Federal Funds Rate is lower than the discount rate

IV The "Effective" Federal Funds rate is the daily compounded rate of interest paid by borrowers



Answer: II and III only

The term "hawkish" monetary policy means that:

The term "hawkish" monetary policy means that:



A. the Federal Reserve is loosening credit by lowering interest rates

B. the Federal Reserve is tightening credit by raising interest rates

C. Congress is stimulating economic growth by increasing government spending

D. Congress is curbing economic growth by decreasing government spending



Answer: B. the Federal Reserve is tightening credit by raising interest rates

What can the Federal Reserve do to stimulate the economy?

What can the Federal Reserve do to stimulate the economy?



A. Buy Treasury securities from banks

B. Sell Treasury securities to banks

C. Increase the reserve requirement

D. Increase the margin requirement



Answer: A. Buy treasury securities from banks

Which of the following actions by the Federal Reserve will increase interest rates?

Which of the following actions by the Federal Reserve will increase interest rates?



I Purchases of securities as directed by the FOMC

II Sales of securities as directed by the FOMC

III Repurchase agreements with U.S. Government dealers and banks

IV Reverse repurchase agreements with U.S. Government dealers and banks



Answer: II and IV

Which tool would be used by the Federal Reserve to control inflation?

Which tool would be used by the Federal Reserve to control inflation?



A. Adjusting tax rates

B. Adjusting the level of government spending

C. Adjusting the balance of payments

D. Adjusting the discount rate



Answer: D. Adjusting the discount rate

In a deflationary period, which of the following statements are TRUE?

In a deflationary period, which of the following statements are TRUE?



I Equity securities are a defensive investment

II Equity securities are not a defensive investment

III Fixed income securities are a defensive investment

IV Fixed income securities are not a defensive investment



Answer: II and III

What is subtracted to find the real interest rate?

What is subtracted to find the real interest rate?



A. The inflation rate

B. The deflation rate

C. The discount rate

D. The prime rate



Answer: A. The inflation rate

Monetary policy is set by:

Monetary policy is set by:



A. Supreme Court decisions

B. Congressional action

C. Presidential edict

D. Federal Reserve action



Answer: D. Federal Reserve Action

Fiscal policy is set by:

Fiscal policy is set by:



A. Supreme Court decisions

B. Congressional action

C. Presidential edict

D. Federal Reserve action



Answer: B. Congressional Action

If a country is exporting more, then than country's:

If a country is exporting more, then than country's:



A. GDP is increasing

B. GDP is decreasing

C. Inflation rate is increasing

D. Inflation rate is decreasing



Answer: A. GDP is Increasing

In the same year, a customer has $14,000 of long-term capital losses on stock positions and $4,000 of short-term capital gains on options positions. Which statement is TRUE?

In the same year, a customer has $14,000 of long-term capital losses on stock positions and $4,000 of short-term capital gains on options positions. Which statement is TRUE?



A. The capital losses can be netted against the capital gains and a $10,000 net capital loss is reported, all of which is deductible

B. The capital losses can be netted against the capital gains and a $10,000 net capital loss is reported, $3,000 of which is deductible

C. The $14,000 of capital losses on the stock positions must be reported separately from the $4,000 of capital gains on the options positions, with all $14,000 of capital losses being deductible and all $4,000 of capital gains being taxable

D. The $14,000 of capital losses on the stock positions must be reported separately from the $4,000 of capital gains on the options positions, with only $3,000 of capital losses being deductible and all $4,000 of capital gains being taxable



Answer: B. The capital losses can be netted against the capital gains and a $10,000 net capital loss is reported, $3,000 of which is deductible

A customer has $8,000 of capital losses and $3,000 of capital gains in a tax year. On that year's tax return, the investor has a(n):

A customer has $8,000 of capital losses and $3,000 of capital gains in a tax year. On that year's tax return, the investor has a(n):



A. $3,000 capital loss deduction with no loss carryforward

B. $3,000 capital loss deduction and a $2,000 loss carryforward

C. $3,000 capital loss deduction and a $5,000 loss carryforward

D. $8,000 capital loss deduction



Answer: B. $3,000 capital loss deduction and a $2,000 loss carry forward

Which statement is TRUE about taxation of capital gains?

Which statement is TRUE about taxation of capital gains?



A. Short term capital gains are taxed at higher rates than long term capital gains

B. Short term capital gains are taxed at lower rates than long term capital gains

C. Short term capital gains are taxed at the same rate as long term capital gains

D. Short term capital gains are taxed at ordinary income rates; long term capital gains are tax deferred



Answer: A. short term capital gains are taxed at higher rates than long term capital gains

Which of the following statements are TRUE about capital gains taxes for investors who are not extremely high earners?

Which of the following statements are TRUE about capital gains taxes for investors who are not extremely high earners?



I The maximum tax rate on a short term capital gain is 15%

II The maximum tax rate on a short term capital gain is 37%

III The maximum tax rate on a long term capital gain is 15%

IV The maximum tax rate on a long term capital gain is 37%



Answer: II and III

Which of the following securities transactions would result in a long term capital gain?

Which of the following securities transactions would result in a long term capital gain?



I Purchase 100 shares of ABC stock at $50 on January 2, 2018; Sell 100 shares of ABC stock at $60 on July 2, 2018

II Purchase 100 shares of ABC stock at $50 on January 2, 2018; Sell 100 shares of XYZ stock at $60 on July 2, 2018

III Purchase 100 shares of ABC stock at $50 on January 2, 2018; Sell 100 shares of ABC stock at $60 on January 3, 2019

IV Purchase 100 shares of ABC stock at $50 on January 2, 2018; Sell 100 shares of XYZ stock at $60 on January 2, 2019



Answer: III only

Which statements are TRUE regarding the taxation of capital gains?

Which statements are TRUE regarding the taxation of capital gains?



I A capital gain is considered to be short term if a position is liquidated at a profit after being held for 1 year or less

II A capital gain is considered to be short term if a position is liquidated at a profit after being held for over 1 year

III For investors in the maximum tax bracket, any short term capital gains will be taxed at the same tax rate as that bracket

IV For investors in the maximum tax bracket, any short term capital gains will be taxed at a lower rate than that bracket



Answer: I and III

Which index is the narrowest measure of the market?

Which index is the narrowest measure of the market?



A. Wilshire Index

B. Value Line Index

C. NYSE Composite Index

D. Dow Jones Industrial Average



Answer: D. Dow Jones Industrial Average

A customer viewing virtual trading floor information on the NYSE Website notices that he can see most, but not all, of the stocks included in the Dow Jones Industrial Average, trading on the floor. The customer asks his registered representative why this is the case. The customer should be told that:

A customer viewing virtual trading floor information on the NYSE Website notices that he can see most, but not all, of the stocks included in the Dow Jones Industrial Average, trading on the floor. The customer asks his registered representative why this is the case. The customer should be told that:



A. Of the 30 stocks included in a Dow Jones Industrial Average, a handful do not trade on the NYSE

B. The NYSE only includes the most actively traded Dow Jones Industrial Average stocks in the display

C. These are the companies that have not paid the NYSE to be included in the display

D. The companies that are not displayed have just announced significant news and trading has been halted in those issues until the news is disseminated



Answer: A. Of the 30 stocks included in a Dow Jones Industrial Average, a handful do not trade on the NYSE

An investor holds an international bond fund. Regarding the performance of the fund, which of the following statements are TRUE?

An investor holds an international bond fund. Regarding the performance of the fund, which of the following statements are TRUE?



I If the foreign currency value rises against the dollar, the fund's Net Asset Value will increase

II If the foreign currency value rises against the dollar, the fund's Net Asset Value will decrease

III If the dollar falls against the foreign currency, the fund will have an inferior performance relative to dollar denominated funds

IV If the dollar falls against the foreign currency, the fund will have a superior performance relative to dollar denominated funds



Answer: I and IV

During the past year, foreign investment in the United States has been increasing. The likely cause for this is:

During the past year, foreign investment in the United States has been increasing. The likely cause for this is:



A. the United States has been running a trade surplus, demonstrating the strength of the economy

B. interest rates in the United States are higher than those available overseas

C. the U.S. economy has been undergoing a broad expansion during the past year

D. the dollar has been strengthening, producing gains for investors in dollars over the past year



Answer: B. Interest rates in the United States are higher than those available overseas 

If the real Gross Domestic Product of the G-20 countries is growing at a faster rate than real Gross Domestic Product growth in the United States, then the value of the U.S. dollar can be expected to:

If the real Gross Domestic Product of the G-20 countries is growing at a faster rate than real Gross Domestic Product growth in the United States, then the value of the U.S. dollar can be expected to:



A. appreciate

B. depreciate

C. fluctuate

D. stagnate



Answer: B. depreciate

Trading in the Interbank market will affect all of the following directly EXCEPT:

Trading in the Interbank market will affect all of the following directly EXCEPT:



A. foreign currency prices in terms of U.S. dollars

B. American Depositary Receipt prices in terms of U.S. dollars

C. future economic growth

D. future trade deficit or surplus figures



Answer: B. American Depositary Receipt prices in terms of U.S. dollars

Trading in the Interbank market will DIRECTLY affect:

Trading in the Interbank market will DIRECTLY affect:



I American Depositary Receipt prices in terms of U.S. dollars

II Foreign Currency prices in terms of U.S. dollars

III Future trade deficit or surplus figures

IV Future economic growth



Answer: II, III, and IV

Which of the following statements are TRUE about the interbank market?

Which of the following statements are TRUE about the interbank market?



I Foreign currency values are determined in this market

II The market is centralized

III Trading is regulated

IV Foreign policy actions affect values in the market



Answer: I and IV

A U.S. balance of payments deficit would be narrowed by which of the following?

A U.S. balance of payments deficit would be narrowed by which of the following?



A. Increased levels of U.S. imports

B. Decreased sales of U.S. securities to foreign holders

C. Increased levels of foreign tourists visiting the United States

D. Increased dividends paid to foreign holders of U.S. securities



Answer: C. Increased levels of foreign tourists visiting the United States (If the balance of payments is running a deficit, then more U.S. Dollars are being spent abroad for foreign goods and services than are being spent in the United States by foreigners for domestic goods and services.

Subscribe to: Posts (Atom)