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An investor is bullish on a particular stock for the long run, but he would prefer a better price than the stock's current quote. Which of the following trades should the investor enter for this stock?
Answer : B
A limit order to buy allows the investor to specify the maximum price he is willing to pay for the stock. The order will only execute if the stock price falls to or below the specified price.
B is correct because a limit order to buy aligns with the investor's desire to secure a better price.
A is incorrect because a limit order to sell is used when an investor wants to sell at a minimum price.
C and D are incorrect because market orders execute at the current market price, not at a preferred price.
A registered representative (RR) at a member firm is the subject of a statutory disqualification. Which of the following statements is true?
Answer : B
A statutory disqualification occurs if an RR has been convicted of certain crimes, violated securities laws, or been barred by a regulatory authority. Under FINRA rules, the RR cannot associate with a member firm in any capacity unless they obtain a waiver from FINRA.
B is correct because the disqualified person must obtain a waiver to continue employment.
A and C are incorrect because the RR is not allowed to associate with the firm in any capacity without a waiver.
D is incorrect because statutory disqualification directly affects the RR's employment status.
Which of the following responses describes a FINRA member?
Answer : D
A FINRA member is a broker-dealer that is registered with FINRA and regulated by a national securities association. Individuals employed by the member firm (e.g., registered representatives) are associated persons, not members themselves.
D is correct because FINRA membership applies to broker-dealers, not individuals.
A, B, and C are incorrect because they refer to individuals or roles within member firms, not the firms themselves.
Which of the following responses describes treasury stock?
Answer : C
Treasury stock refers to shares that were issued by a company and subsequently repurchased by the company. These shares are held in the company's treasury and are not considered outstanding.
C is correct because treasury stock is stock reacquired by the issuer.
A is incorrect because authorized but unissued stock has never been issued.
B is incorrect because restricted stock refers to shares issued with restrictions on transferability, not reacquired stock.
D is incorrect because it incorrectly refers to government securities, not corporate stock.
A customer purchases $3,000 of XYZ, which settles today in a margin account. The customer has no other positions or balances. According to initial margin requirements, what is the amount of the required deposit?
Answer : B
Under Federal Reserve Regulation T, customers must deposit at least 50% of the purchase price for margin trades. However, the minimum deposit requirement is $2,000, regardless of the 50% rule, if the account is below this threshold.
50% of $3,000 = $1,500.
Since $1,500 is less than the $2,000 minimum, the customer must deposit the full $2,000.
B is correct because $2,000 is the required minimum deposit.
A is incorrect because the $1,500 calculation does not meet the minimum.
C and D are incorrect because they exceed the minimum deposit requirement.
