Before an affiliate of an issuer is permitted to sell 10,000 shares of restricted securities, which of the following conditions must be met?
Answer(s): A
Rule 144 Holding Period: Restricted securities held by affiliates require a six-month holding period before sale, provided the issuer is subject to SEC reporting requirements.Other Options:Notification to FINRA (C) is incorrect; Form 144 is submitted to the SEC, not FINRA.The 10% ADTV limitation (D) applies to the volume of shares sold, not the conditions for sale.
SEC Rule 144 (Selling Restricted Securities): S, E, C Rule 144.
Which of the following strategies is best for mitigating the risk of a concentrated position?
Diversification: Spreads investments across multiple securities, industries, or asset classes to reduce exposure to a single security or sector.Other Options:Use of Leverage: Increases, not decreases, portfolio risk.Dollar-Cost Averaging: Reduces timing risk but does not address concentration.Dividend Reinvestment: Enhances returns but does not mitigate concentration risk.
SEC Guidance on Diversification: SEC Diversification.
Which of the following rates is the interest rate at which banks borrow and lend to each other on an overnight basis?
Answer(s): C
Federal Funds Rate: The rate at which depository institutions lend reserves to each other overnight. It is set by the Federal Open Market Committee (FOMC).Other Rates:Prime Rate: Rate banks charge their most creditworthy customers.Discount Rate: Rate the Federal Reserve charges banks for borrowing directly from it.LIBOR: Interbank lending rate used internationally, now being phased out.
Federal Reserve Explanation of Rates: Federal Funds Rate.
A real estate investment trust (REIT) is required to invest what percentage of total assets in real- estate-related assets to maintain favorable tax treatment?
Answer(s): B
REIT Requirements: REITs must invest at least 75% of their total assets in real estate to qualify for favorable tax treatment under IRS regulations.90% Rule: Refers to the distribution requirement for taxable income, not asset allocation.100% Rule: There is no requirement to allocate 100% of assets to real estate.
IRS Publication 542 (Real Estate Investment Trusts): I, R, S REIT Guidelines.
A bond with a par value of $1,000 that is backed by the taxing power of a local government is known as:
Answer(s): D
General Obligation (GO) Bonds: Backed by the full faith and credit of the issuing municipality, relying on its taxing power for repayment.Revenue Bonds: Supported by revenues from a specific project or source.Treasury Bonds: Issued by the federal government.Corporate Bonds: Issued by corporations, not municipalities.
SEC Municipal Bond Guide: SEC GO Bonds.
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