EMT Practice Test

1. Question Content...

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Question1: If a mutual fund has invested its assets by allocating about one-third each for bonds, preferred stocks, and
common stocks, it is identified as:

Question2: Which of the following would not be subject to the holding period restrictions under Rule 144?

Question3: CMOs are sold and priced based upon which of the following:

Question4: The Bubba Corporation is offering stock to the public for the first time. The registration statement lists
1 50,000 shares for sale at $400 per share. The company conducts business in a 100-mile radius that
includes towns in two neighboring states. Which of the following information is not required in the
preliminary prospectus for this offering?

Question5: On which of the following is depreciation permitted?

Question6: Registration of open-end investment company shares with the SEC implies that the:

Question7: When depositors withdraw money from savings institutions to invest in US treasury securities, this is
called:

Question8: Which of the following sources provides news of prospective municipal securities sales to underwriters?

Question9: Bubba buys one XYZ September 50 call at $7 and sells one XYZ September 60 call at $3. At that time,
XYZ stock is at $55. Bubba has no other stock positions. At what must XYZ trade for Bubba to break
even?

Question10: The agreement between the members of a syndicate and the manager is known as the:

Question11: Bubba buys 100 shares of XYZ stock at $40 per share and sells a listed July XYZ call at 45 for a $2
premium. What is his loss potential?

Question12: What percentage load is associated with a mutual fund quoted 16.60-18.04?

Question13: A mutual fund characterized by a modest sales charge and an investment in a fixed portfolio of municipal
securities is a:

Question14: What Federal Reserve Board regulation governs the extension of securities-related credit by banks?

Question15: Bubba buys a bond issued at par with a 5% coupon that is convertible into common stock at $40. The
bond increases in value by 20 points. What is the conversion parity of the stock?

Question16: The total assets of a corporation are $840,000, of which $350,000 are current items. Total liabilities are
$ 460,000, of which $290,00 are fixed obligations. How much is the corporation's working capital?

Question17: Bubba opens a new account with a broker/dealer and asks for a copy of the firm's financial statement. If
the firm has not been subject to a formal audit by an independent public accountant for quite some time,
what should it do in response to the request?

Question18: In order to determine the amount of estate tax due, if any, the assets of a decedent's estate are valued as
of the date of death. A second evaluation is then made:

Question19: Which of the following oil and gas programs does not directly involve drilling?

Question20: Service charges by a FINRA dealer for transfer and safekeeping of customer securities held in street
name:

Question21: A large manufacturing company has current assets of approximately $9,400,000 and current liabilities of
about $4,900,000. Which of the following statements is true about the current ratio?

Question22: In a corporation's financial statements, earned surplus is also recognized as:

Question23: Which of the following is not in the subscription agreement for a limited partnership offering?

Question24: Which of the following is not true about US treasury bills?

Question25: If recaptured deductions are added to income, recaptured investment tax credits are added to:

Question26: Bubba owns stock with cumulative voting rights. There are five vacancies on a board and he owns 100
shares of stock. Bubba is entitled to cast the following votes:

Question27: A provision under which an underwriter can cancel a proposed public offering due to some unforeseen
occurrence is known as a:

Question28: The minimum denomination for a US treasury bond is:

Question29: Bubba has not existing positions in his account and writes 1 XYZ July 60 put and 1 XYZ July 60 call. What
is this position called?

Question30: Which of the following activities by a limited partner may subject the partner to unlimited liability?

Question31: Who is responsible for verifying that limited partners meet net worth and income requirements?

Question32: The accounting statement that represents a company's financial position on a particular date is the:

Question33: Bubba entered an order to sell long 100 shares of XYZ at 38.75 stop limit. Thereafter, the following
round-lot transactions occurred: 38.75, 38.65, 38.50. At what price was Bubba's order executed?

Question34: The initial Federal Reserve Bank margin requirement is set at 60% and Bubba purchases 100 shares of
XYZ at $100 per share. He deposits $6,000 of the $10,000 purchase price in his account. If XYZ
increases in value to $150 per share, how much excess equity would Bubba have in his account?

Question35: Bubba is long spot Canadian dollars at 0.7400. If he wants to buy one put option on Canadian dollars with
a strike price of 74 and a cost of $0.35, what is Bubba's breakeven price for Canadian dollars?

Question36: For what time period does a Form 144 remain in effect?

Question37: A company earns $6 per share and pays out 20% in common stock dividends. What does the stock yield if
it sells at $30 per share?

Question38: How many days after the settlement date must a broker/dealer "buy in" a customer who has failed to
deliver securities?

Question39: How often must Investment companies issue financial statements to shareholders?

Question40: Bonds are most often quoted as a percentage of:

Question41: Bubba buys a 5% bond that matures in 15 years with a 5.10 basis. How much did he pay for the bond?

Question42: If a municipality has funds available to make a partial call of an issue of outstanding serial bonds, which
bonds should be called first?

Question43: Bubba holds 200 shares of common stock in a utility company and receives rights to subscribe to an
additional 100 shares at $20. The utility company is raising $40 million of new capital. How many shares
of common stock for the utility company were outstanding prior to the rights offering?

Question44: Bubba is buying a treasury bill. The discount he receives results in Bubba's determination of:

Question45: Which of the following statements is not true about exchange traded options?

Question46: Bubba is buying a Federal Home Loan Bank issue that is offered at 95.22. How much will he pay to
purchase one bond?

Question47: Hypothecation usually refers to which of the following?

Question48: Level III of NASDAQ provides which of the following?

Question49: An excerpt from a recent tombstone ad reveals bonds offered publicly at 101. Why were they priced at a
premium?

Question50: With respect to the public offering of securities by an underwriting syndicate, which of the following is
true?

Question51: Bubba sells short 100 XYZ at $60 and makes the required Regulation T deposit of 50%. XYZ then rises I
price to $65. At this point what is the credit balance?

Question52: In terms of depletion, percentage depletion is better than cost depletion because it:

Question53: Under what conditions may an FINRA member firm sell an IPO to an employee of another broker/dealer?

Question54: A corporation makes a rights offering to raise $10 million of new capital by issuing one million shares of
common stock. If it already has six million shares outstanding at the time of the offering. How many rights
will the corporation distribute to its shareholders?

Question55: Which of the following is not true about brokerage accounts?

Question56: Which of the following does not appear in the official notice of sale?

Question57: Which of the following statements about the custodian for an open-end mutual fund is correct?

Question58: Which of the following types of investment companies pays out 90% of its net investment income to
shareholders?

Question59: Call loans made by banks to broker/dealers are generally for the purpose of which of the following?

Question60: In a competitive bidding for mortgage bonds of a large public utility the winning underwriter is determined
by:

Question61: In a monthly review of customer statements, Bubba notices that one of his firm's clients has paid for
seven purchases five days late. What does he do?

Question62: Which of the following does not issue debt securities that trade in the open market?

Question63: Assuming all of the following bonds from the same issuer are callable now, which one would most likely
get called first?

Question64: Which of the following will not result in termination of a limited partnership?

Question65: Which of the following is considered a firm quotation in the over-the-counter market?

Question66: Which of the following securities is traded only in the over-the-counter market?

Question67: In a securities underwriting a participating firm is said to be liable severally but not jointly. What is this type
of underwriting is called?

Question68: In what broad category of municipal bonds are "limited tax" bonds placed?

Question69: A mutual fund with an 8% load and a 1% redemption fee carries a current quote of $6.25 - $6.79. If an
investor has tendered his shares for redemption on that basis, the per share price he will receive is
approximately:

Question70: Bubba Corporation has net income of $4,200,000. It has 100,000 outstanding shares of 8% preferred
stock ($100 par value) and 400,000 shares of common stock ($10 par value). What are the earnings per
share of common stock?

Question71: Bubba decides to buy equity securities. Which of the following statements is always true about what
Bubba is buying?

Question72: Which of the following is considered an intangible asset?

Question73: The definition of debentures is:

Question74: Under the Investment Company Act of 1940, what is the minimum net worth of a registered investment
company?

Question75: With the Regulation T requirement at 50%, a firm wishes to impose house rules that require a minimum
equity of 40%. Which of the following is true?

Question76: If federal excise taxes were increased by the government, what would the typical investor do about his
securities portfolio?

Question77: Which of the following forms of underwriting is least likely for an offering of municipal bonds?

Question78: The Bubba Fund is a load mutual fund that offers a reinvestment plan. What does this mean?

Question79: When a corporation issues a nonconvertible debenture, what is the effect upon its net worth?

Question80: What percentage of maintenance charges and debt service are covered by the rate covenant of a revenue
bond issued to finance a municipal toll road?

Question81: Municipalities are most likely to issue notes for which of the following purposes?

Question82: Municipal syndicate allocation procedures are described in which of the following?

Question83: A four-letter symbol assigned to an issue is characteristic of an equity security that is:

Question84: Which of the following is not found in the final prospectus?

Question85: Which securities do not receive dividends?

Question86: Which of the following receives the highest priority of a municipal bond trustee when applying income and
revenue derived from a financed toll facility?

Question87: The Securities Act of 1933 provides for:

Question88: The FINRA markup policy applies to:

Question89: How much money is a concession of 3/8 worth for one municipal bond?

Question90: In the distribution of a new issue, a dealer acting as an underwriter is said to have a:

Question91: Upon opening a new account for a customer, a registered representative should:

Question92: Bubba buys a ten-year municipal and at 102 and sells it five years later at 101. What is tax treatment?

Question93: Which of the following have a stated interest rate on the face of the certificates?

Question94: Bubba has been classified as a restricted person according to Rule 2790. He may purchase equity
securities of an IPO except:

Question95: Bubba buys "double-barreled" municipal bonds. What is the source of guaranteed repayment on these
bonds?

Question96: Bubba's margin account has $2,000 of SMA. If he buys $10,000 of new securities, how much additional
cash must he deposit assuming a Reg T requirement of 50%?

Question97: A trust instrument drawn pursuant to the Trust Indenture Act of 1939 sets forth which of the following?

Question98: Which of the following are direct obligations of the US government?

Question99: Which of the following is not classified as a money market instrument?

Question100: An investment company acting as a conduit in the distribution of net investment income, pursuant to IRS
rules, is called:

Question101: Which of the following sets of prices is that of a closed-end investment company?

Question102: Commercial paper is typically issued with a maturity date not exceeding:

Question103: Bubba Corporation owes income tax. Which of the following may be tendered at par value for payment of
the tax?

Question104: Bubba's order to purchase investment company shares must be executed at a price based upon the net
asset value of the shares:

Question105: Bubba's pledge to purchase a specified dollar amount of a mutual fund within a specified period of time is called:

Question106: Bubba Corporation has 3,500,000 shares of common stock outstanding and its trading volume in the few
weeks has been as follows:
Week 1 - 43,000
Week 2 - 30,900
Week 3 - 37,500
Week 4 - 42,600
Week 5 - 33,000 (the most recent week)
If an affiliated person wanted to liquidate some of his holding of 100,000 shares pursuant to SEC Rule
1 44, how many shares could he sell?

Question107: In a triple net lease, which of the following is the tenant not responsible for paying?

Question108: A new stock offering by Bubba Corporation provides details that state between 1,000,000 and 1,500,000
shares will be sold depending upon market conditions. This offering is a:

Question109: An employer profit sharing plan may be described as:

Question110: The registration requirements of the federal securities acts are intended to protect the public interest by
providing for a prospectus on new issues and its review by the SEC. Which of the following is the true of
this process?

Question111: Which of the following situations is possible for a writer of a covered call option?

Question112: The cost of maintaining an investment in a mutual fund is best reflected in the:

Question113: Bubba buys a 5% municipal bond maturing in 15 years that is trading at a market price of 85. What is the
nominal yield?

Question114: A registered representative is given a limited trading authorization by a client. This permits the
representative to:

Question115: Bubba has a short margin account with a short market value of $22,000, a credit balance of $42,000, and
SMA of $500. What is the equity in Bubba's account?

Question116: Which of the following price quotes is representative of a treasury bill?

Question117: Which of the following are considered to be discretionary orders under the FINRA Rules of Fair Practice?

Question118: The practice of positioning stock in response to a customer's order and immediately after marking it up for
resale to the customer is:

Question119: Which of the following is not a practice of a mutual fund custodian?

Question120: Maintaining a fair and orderly market and acting as a broker's broker are dual functions of the:

Question121: Regulation T is set at 50%. Bubba's account contains long positions in the following securities with the
prices listed
1 00 ABC $30
2 00 XYZ $70
2 00 QBB $40
2 00 KKK $25
Total market value = $30,000
Debit balance in the account = $12,000
Net equity balance of the account = $18,000
What is the buying power in Bubba's account?

Question122: If a customer dies, the registered representative is required to:

Question123: The public offering price of the securities of an open-end management investment company is:

Question124: Bubba owns 200 shares of XYZ at $90, and wishes to hedge the position while generating income. What
is the best recommendation?

Question125: When the Federal Reserve lowers reserve requirements, what is it attempting to do?

Question126: A mutual fund custodian is paid according to which of the following specifications when receiving deposits
from a shareholder's reinvestment plan?

Question127: The most common type of bond issued by a well-established company is:

Question128: What is the term applied to a classification of CMO securities having a stated maturity, average life, and
estimated yield?

Question129: Bubba wants to buy 500 shares of an NYSE listed stock at 38.87 but he wants to buy at one time, right
away, or else forget it. What kind of order should the registered representative enter?

Question130: A market-maker has purchased a particular stock over a period of time for prices as high as $9 per share
and as low as $3 per share. The average cost is approximately $6 per share. The current NASDAQ quote
for the stock is 5 to 5.25. According to the FINRA Conduct Rules, the dealer's offering price to the public
should be based upon:

Question131: Which of the following may occasionally be purchased at a discount from net assets value?

Question132: Bubba owns a perpetual warrant to buy one share of Internet Corporation common stock at $30. Internet
Corporation stock is trading at 41.50 and is ex-dividend today at $0.75. What is the market value of
Bubba's warrant?

Question133: Book value of a corporation is also know as:

Question134: For an FINRA member firm to exercise discretionary power in any customer account requires written
authorization by that customer except when:

Question135: What is the loan value on a call option held in a customer's margin account?

Question136: Feasibility studies and engineering surveys are most necessary prior to which of the following new
offerings?

Question137: What does the bond buyer placement ratio represent?

Question138: A NYSE floor member executing an order for a public customer asks the specialist in the stock to
guarantee a price while giving the customer an opportunity to obtain a better price. This procedure is
known as:

Question139: In a best efforts distribution of a new non-exempt issue, a broker/dealer:

Question140: Bubba Corporation has a profit sharing plan. The company president, Bubba, is receiving the maximum
plan contribution amount. The corporation has one other employee, who is eligible for the plan. If this
person earns $12,000 per year, how much must be deposited in the plan for the employee?

Question141: The Bubba Insurance Company is not incorporated. It consists of Bubba and his two brothers as general
partners, who maintain an active securities account in the name of the company. If one of the partners
should suddenly die, what course of actions should be undertaken by the registered representative at the
brokerage?