EMT Practice Test

1. Question Content...

---

Question1: On settlement date, a customer is unable to pay for a purchase in his cash account. His position is liquidated.
Which of the following statements is true according to Federal Reserve Regulation T?

Question2: A rating agency downgrades a corporation's credit rating. Which of the following effects is thisaction most likely to have on the yield and price of the corporation's outstanding bonds?

Question3: A customer buys 100 ABC at $50 and at the same time sells an ABC April 50 call at $8. At expiration, ABC must be at what market price for the customer to break even?

Question4: Which of the following statements is true about a corporation's balance sheet?

Question5: Under which of the following circumstances, if any, is it permissible for an individual without a Power of Attorney (POA) to sign a customer's name on their behalf?

Question6: Which of the following strategies is an investor most likely to employ using options contracts?

Question7: A registered representative (RR) has a referral relationship with a family friend who is not affiliated with the financial industry. In the absence of a formal agreement, which of the following ways is the RR permitted to compensate the family friend for referrals?

Question8: Which of the following statements is true of an index exchange-traded fund (ETF)?

Question9: Which of the following responses describes a collateralized mortgage obligation (CMO) tranche?

Question10: A confirmation indicates a 100-share purchase of Company ABC at $11. According to SEC rules, which of the following information is required to be stated on the confirmation?

Question11: Company XYZ files a registration statement for its initial public offering (IPO). XYZ is permitted to communicate all of the following information about the offering in writing to investorsexceptthat:

Question12: The process in which the buying firm must pay for the securities and the selling firm must deliver the securities is known as:

Question13: Assume that the economy is operating at nearly full capacity. The initial results of an oversupply of money are most likely to have the greatest impact on which of the following macroeconomic factors?

Question14: A customer will be out of the country for the next two months on business and asks his firm to hold his mail until he returns. Which of the following statements is true regarding this request?

Question15: Class A and Class C shares of a mutual fund differ in which of the following ways?

Question16: Company XYZ is a U.S.-based provider of domestic utility services. XYZ's noncallable bonds pay a coupon rate of 5% and are currently yielding 9%. Market interest rates are currently 5.5%. An investor who purchases XYZ bonds is most exposed to which of the following risks?

Question17: Publicly traded limited partnership interests are typically considered:

Question18: Under SEC Regulation D, which of the following parties is considered an accredited investor?

Question19: Which of the following responses best describes the primary strategy that an investor uses when selling a covered call?

Question20: A customer wants to open an account to trade covered calls and puts. Which of the followingcommunications must be provided to the customer prior to approving the account for trading?

Question21: A bond with a par value of $1,000 that is backed by the taxing power of a local government is known as:

Question22: A customer has a stock position that has increased in value since the time he purchased it. Which of the following terms describes his current situation?

Question23: An investor sells shares of a closed-end fund at the market. Which of the following responses best describes the net proceeds to be received?

Question24: Which of the following security types is frequently offered to the public as part of a package or unit that also includes a fixed income obligation?

Question25: Pursuant to the Securities Act of 1933, registration is required for which of the following securities?

Question26: Which of the following responses best describes a short sale?

Question27: Company ABC stock currently trades on an exchange. An ABC insider wants to sell a large number of shares of her privately held ABC stock. ABC files the necessary paperwork to register the shares, but the insider decides to wait and sell the stock at a later date. Which of the following terms best describes the type of offering that is occurring in this situation?

Question28: Which of the following statements is true regarding 529 savings plans?

Question29: Which of the following transactions gives a U.S. citizen the most efficient means to invest in the stock of an overseas corporation that trades only on a foreign exchange?

Question30: 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?

Question31: Which of the following is a reportable obligation with respect to an individual's Form U4?

Question32: A currency devaluation impacts a country's economic activity in which of the following ways?

Question33: Which of the following is not a pass-through entity for tax purposes?

Question34: Offering 403(b) tax-sheltered annuity accounts to which of the following groups is permissible?

Question35: A market maker quotes the market on an NMS equity security as 39.05 - 39.15 [5x10]. Which of the following orders is the market maker required to fill?

Question36: SIPC provides investor protection for its members' customers in which of the following situations?

Question37: Which of the following rates is the interest rate at which banks borrow and lend to each other on an overnight basis?

Question38: Which of the following responses describes a common feature of a hedge fund?

Question39: Which of the following statements is true with regard to SIPC and FDIC?

Question40: Which of the following statements concerning nonqualified deferred compensation plans is true?

Question41: An investor wants to purchase mutual fund shares, but she is concerned about the tax efficiency of the fund.
Which of the following disclosures required under industry regulations will help the investor make an informed decision?

Question42: A broker-dealer (BD) creates a marketing postcard that includes a statement regarding FINRA's endorsement of the BD. Which of the following responses is true?

Question43: An investor holds 1,000 shares of a stock with a total cost basis of $5,000 in his account when a 1-for-5 reverse stock split is announced. What will be the investor's total cost basis after the payable date of the reverse split?

Question44: A customer purchased $80,000 of Fund XYZ two years ago. He now wants to buy $50,000 of Fund LMN offered within the same fund family, which offers a $100,000 breakpoint under right of accumulation. Which of the following statements is true?

Question45: For a customer thinking about purchasing a high-income bond mutual fund, which of the following is considered the primary risk of the underlying securities in the portfolio?

Question46: Which of the following securities has the greatest investment risk?

Question47: Which of the following responses best describes how member firms are required to retain electronic correspondence and internal communications of associated persons?

Question48: A customer owns 100 shares of ABC with a current market value of $5.00 per share. The company undergoes a 1-for-2 reverse split of the stock. Which of the following statements is true of the customer's holdings and the price of the stock?

Question49: A registered representative (RR) receives a mutual fund order from a customer at 4:10 p.m. ET. Which of the following statements is true regarding this order?

Question50: What is the sales load of an open-end investment company with a net asset value (NAV) of $14.35 and a public offering price (POP) of $15.50?

Question51: Which of the following statements best describes an American Depositary Receipt (ADR)?

Question52: The cash value of a variable life insurance policy is affected by which of the following factors?

Question53: When is a newly registered person subject to the Continuing Education Regulatory Element requirement?

Question54: Rising economic activity is most likely to increase revenues of which of the following sectors?

Question55: How long are unused funds permitted to remain in a Coverdell education savings account?

Question56: Under SEC Regulation A, which of the following market participants, if deemed to be a bad actor, will disqualify the offering from reliance on this registration exemption?

Question57: A market maker quotes the market on an NMS equity security as 39.05 - 39.15 [5x10]. Which of the following orders is the market maker required to fill?

Question58: The civil penalty for an individual who is convicted of an insider trading violation is permitted to be an amount up to how many times the profit gained or loss avoided?

Question59: If an investor is bullish on ABC, which of the following actions will he most likely take?

Question60: An individual investor has $300,000 in cash and $400,000 in securities held with a financially troubled SIPC member firm for which liquidation has begun. The individual investor's cash is protected for what amount?

Question61: An investor is bullish on the technology sector and heavily invests in microchip companies. Impactful regulatory changes are announced that will negatively affect microchip manufacturing. In order to mitigate the risk to his portfolio, the investor should:

Question62: The formation of an asset-backed security or debt obligation that represents a claim on the cash flows from mortgage loans is known as:

Question63: Which of the following is the primary risk of using asset allocation models without periodic rebalancing?

Question64: A customer wants to establish an account for the benefit of his grandchildren. He states to his registered representative that he wants to be able to control the distribution of the assets and direct how the account will be invested. Which of the following account types is most appropriate?

Question65: Which of the following terms describes an offer to purchase some or all shareholders' shares in a corporation, usually at a premium to the market price?

Question66: When are registered persons required to fulfill their Continuing Education (CE) Regulatory Element requirement?

Question67: A registered representative (RR) opens a new account for a customer whose investment objectives are growth and income. She makes an initial deposit of $5,500 using a series of money orders drawn from different sources, and she makes no investments for the first 30 days the account is open. At the end of that time, the customer asks to have the funds wired to an account at a different firm as her needs have changed. The RR's first course of action should be to:

Question68: When is it permissible to exercise European-style options contracts?

Question69: Which of the following disclosures is a municipal securities dealer required to provide its customers once every calendar year?

Question70: Beta coefficient is a measure of:

Question71: A customer purchased 100 shares of Company XYZ common stock five years ago for $20.00 per share. Over the life of her investment, the customer received cash dividends of $2.00 per share, on which she paid total income taxes of $0.50 per share. She recently sold the stock for $30.00 per share. What is the customer's cost basis in each share of XYZ stock?

Question72: SEC Regulation S-P (Consumer Privacy) requires certain information to be included in privacy notices delivered to customers of broker-dealers (BDs). Which of the following information is required to be included in the privacy notice?

Question73: A registered representative (RR) owns 500 shares of a thinly traded security. A customer of the firm calls the RR to place a sell order for 10,000 shares of the same security. The RR sells his shares before entering the customer's order to sell. Which of the following activities has the RR just engaged in?

Question74: Which of the following statements describes a characteristic of exchange-traded funds (ETFs)?

Question75: Which of the following activities is a responsibility of a mutual fund transfer agent?

Question76: Which of the following listed securities carries voting rights?

Question77: Which of the following is considered nonpublic information?

Question78: Which of the following entities settles broker-to-broker equity, listed corporate and municipal bond, and unit investment trust (UIT) transactions in the U.S. equities markets?

Question79: A summary prospectus for a mutual fund must contain which of the following information?

Question80: Which of the following risks are associated with Treasury securities?