The provision that allows a bond issuer to purchase bonds from customers prior to the maturity date on the bond is known as a:
Answer(s): B
Call Provision: This allows the issuer to redeem bonds before their maturity date, usually at a premium to the par value, which benefits the issuer in a declining interest rate environment.Put Provision: Allows bondholders, not issuers, to sell the bond back to the issuer.Conversion: Relates to convertible bonds that can be converted into equity.Defeasement: Refers to the removal of a bond issuer's obligation by setting aside cash or securities to cover the debt.
SEC Guide on Callable Bonds: SEC Callable Bonds.
Which of the following types of accounts permits an investor to borrow money from a broker-dealer to help pay for a trade?
Margin Accounts: Allow investors to borrow funds to purchase securities, with the securities serving as collateral for the loan.Cash Accounts: Require full payment for securities purchased.IRAs: Do not permit borrowing due to their tax-advantaged status.DVP/RVP: Settlement mechanisms, not account types for borrowing.
FINRA Rule 4210 (Margin Requirements): F, I, N, R, A Rule 4210.
A rating agency downgrades a corporation's credit rating. Which of the following effects is this action most likely to have on the yield and price of the corporation's outstanding bonds?
Answer(s): C
Credit Downgrade: Increases perceived risk, causing bond prices to drop and yields to rise.Yield-Price Relationship: Yields move inversely to bond prices. Lower prices lead to higher yields as investors demand more return for increased risk.
SEC Guidance on Bond Ratings: SEC Bond Ratings.
Which of the following responses best describes a short sale?
Short Sale Definition: Involves selling borrowed securities with the expectation of repurchasing them at a lower price.Investor Ownership: Short sales do not involve securities already owned by the seller.Other Options: None of the other choices accurately define a short sale.
SEC Regulation SHO (Short Selling): SEC Short Sales.
A registered representative who is terminated from a broker-dealer must notify FINRA of a residential address change for what period of time after termination?
FINRA Rule 1122: Requires that registered representatives update their residential address with FINRA for two years post-termination.Purpose: This ensures accurate records for potential regulatory inquiries during the statutory two- year period when a terminated individual remains subject to FINRA's jurisdiction.
FINRA Rule 1122 (Filing False or Misleading Information): FINRA Rule 1122.
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