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?
Answer(s): A
Right of Accumulation: Allows an investor to combine the value of existing investments within the same fund family to qualify for a breakpoint (reduced sales charge) on new purchases.Current Holdings: $80,000New Purchase: $50,000Total: $130,000, qualifying for the $100,000 breakpoint.Incorrect Options:B: Contributions from all funds within the same family can be aggregated.C: A new letter of intent is unnecessary; right of accumulation applies automatically.D: Discounts apply immediately, not retroactively.
FINRA Guidance on Breakpoints: FINRA Breakpoints.
Which of the following statements is true regarding the difference in treatment between common stock and preferred stock?
Answer(s): D
Priority in Bankruptcy: Preferred stockholders have a higher claim on a company's assets than common stockholders during liquidation. Common stockholders are residual claimants.Dividend Priority: Preferred stockholders are entitled to fixed dividends before common stockholders receive any dividends.Incorrect Options:A & B: Common and preferred stocks are treated differently in bankruptcy and dividend payments.C: Common stock dividends are subordinate to preferred stock dividends.
SEC Guidance on Stockholder Rights: SEC Stock Rights.
Corporate bonds unsecured by any pledge of property are called:
Debentures: Corporate bonds not backed by physical assets or collateral. They rely on the issuer's creditworthiness.Incorrect Options:B: Trust certificates are a legacy term for bonds backed by a trust.C: Collateral trust bonds are secured by financial assets.D: GO bonds are issued by municipalities, not corporations.
SEC Guide on Corporate Bonds: SEC Corporate Bonds.
Which of the following products is the most appropriate class of investments for a customer looking for income and capital gains?
Answer(s): C
Blue-Chip Stock Mutual Funds: Invest in large, established companies that typically provide stable dividend income and potential for capital appreciation.Incorrect Options:A: Growth stocks prioritize capital appreciation, not income.B: Money market accounts focus on safety and liquidity, not capital gains.D: STRIPS provide fixed income without capital gains potential.
FINRA Investment Product Education: FINRA Investment Guidance.
A city has appointed Broker-dealer XYZ to act as lead underwriter for its upcoming issuance of municipal bonds. This is an example of which of the following types of offering?
Answer(s): B
Negotiated Offering: Occurs when the issuer directly selects an underwriter and negotiates terms.Common in municipal bond issuances.Incorrect Options:A: Follow-on offerings apply to subsequent issuances of equity securities.C: Competitive offerings involve multiple underwriters submitting bids.D: Best-efforts offerings do not guarantee the sale of all securities.
MSRB Overview of Municipal Offerings: MSRB Offerings.
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