One of the benefits of receiving incentive stock options from your employer rather than non-qualified stock options is:

One of the benefits of receiving incentive stock options from your employer rather than non-qualified stock options is:

A) it is not necessary to hold ISOs as long as NSOs.
B) the opportunity to receive long-term capital gains tax treatment.
C) the exercise price is usually below the current market price.
D) that more shares are generally available through ISOs than NSOs.


Answer: B) the opportunity to receive long-term capital gains tax treatment.

A corporation would like to offer their employees an opportunity to participate in the future growth of the company. Among the methods you might suggest are:

A corporation would like to offer their employees an opportunity to participate in the future growth of the company. Among the methods you might suggest are:

A) subordinated debentures.
B) employee stock options.
C) pre-emptive rights.
D) voting trust certificates.


Answer: B) employee stock options.

When one invests in a common stock, the opportunity cost of doing so exposes him to all of the following risks EXCEPT:

When one invests in a common stock, the opportunity cost of doing so exposes him to all of the following risks EXCEPT:

A) market risk.
B) systematic risk.
C) credit risk.
D) business risk.


Answer: Opportunity cost is the opportunity given up when an economic decision is made. In the investment field, it generally refers to the risks taken versus keeping money in a risk-free investment such as the 90-day Treasury bill. When one invests in common stock, there is no credit risk because there is no credit - stock is equity, not a debt.

Which of the following is responsible for administration of the Bank Secrecy Act?

Which of the following is responsible for administration of the Bank Secrecy Act?

A) The Financial Crimes Enforcement Network.
B) Securities and Exchange Commission.
C) Department of Health and Human Service.
D) Security Services.


Answer: A) The Financial Crimes Enforcement Network.

Which of the following statements regarding nonqualified stock options (NSOs) is(are) CORRECT?

Which of the following statements regarding nonqualified stock options (NSOs) is(are) CORRECT?

I. The exercise of NSOs does not create taxable income.

II. The NSO is taxable to the recipient at the time of exercise to the extent of the difference between the fair market value of the stock and the exercise price.

A) Neither I nor II.
B) II only.
C) I only.
D) Both I and II.


Answer: B) II only.

Under the Securities Act of 1933, which of the following would be considered a prospectus?

Under the Securities Act of 1933, which of the following would be considered a prospectus?

I. Tombstone advertisement.
II. Television advertisement that makes full disclosure of all material facts.
III.Offer communicated over the telephone.

A) I and III.
B) III only.
C) II only.
D) I and II.


Answer: C) II only.

Under the Securities Act of 1933, which of the following is NOT a security?

Under the Securities Act of 1933, which of the following is NOT a security?

A) A stock right.
B) Convertible stock.
C) A fixed life insurance contract.
D) A stock warrant.


Answer: C) A fixed life insurance contract.

Under the Securities Act of 1933, which of the following would NOT be considered a bona fide sale?

Under the Securities Act of 1933, which of the following would NOT be considered a bona fide sale?

A loan of stock.
A bonus of stock given in conjunction with the purchase of another stock.
A gift of stock.

A) II and III.
B) I, II and III.
C) I and III.
D) I and II.


Answer: C) I and III.

Which of the following are NOT exempt from the ANTIFRAUD PROVISIONS of the Securities Act of 1933?

Which of the following are NOT exempt from the ANTIFRAUD PROVISIONS of the Securities Act of 1933?

U.S. government securities.
Investment contracts issued by employee benefit plans.
Securities issued by federal banks.

A) II and III.
B) I, II and III.
C) I and II.
D) I and III.


Answer: B) I, II and III.

Under the Securities Act of 1933, which of the following does not meet the definition of a prospectus?

Under the Securities Act of 1933, which of the following does not meet the definition of a prospectus?

A) A newsletter from a brokerage firm announcing the availability of a security.
B) An advertisement in a newspaper describing the benefits of a certain mutual fund.
C) A telephone call from a broker to a client advising the purchase of a security.
D) A publicity release that describes a security.


Answer: C) A telephone call from a broker to a client advising the purchase of a security.

Under the Securities Act of 1933, the definition of an issuer would include:

Under the Securities Act of 1933, the definition of an issuer would include:

I. a government entity issuing exempt securities.
II. a corporation issuing securities in an exempt transaction.
III. an antique dealer selling items from a collection of rare books.

A) II and III.
B) III only.
C) I, II and III.
D) I and II.


Answer: D) I and II.

Under the Securities Act of 1933, the term "person" could refer to which of the following?

Under the Securities Act of 1933, the term "person" could refer to which of the following?

A subdivision of a government.
An unincorporated amateur athletic club.
A nonprofit, charitable corporation.

A) II and III.
B) I, II and III.
C) I only.
D) I and III.


Answer: B) I, II and III.

Under the Securities Act of 1933, the definition of a prospectus includes:

Under the Securities Act of 1933, the definition of a prospectus includes:

I. an offer of a security made orally.
II. a tombstone advertisement for a security.
III. an offer of a security made in a personal letter.

A) I and III.
B) II and III.
C) I, II and III.
D) III only.


Answer: D) III only.

Which of the following securities issues must be registered with the SEC under the Securities Act of 1933?

Which of the following securities issues must be registered with the SEC under the Securities Act of 1933?

I. Public DPPs.
II. Variable annuities.
III.Open-end funds.
IV. Closed-end funds.

A) I, II, III and IV.
B) I and II.
C) II and III.
D) III and IV.


Answer: A) I, II, III and IV.

All of the following must be sold with prospectus EXCEPT:

All of the following must be sold with prospectus EXCEPT:

A) a closed-end fund in the secondary market.
B) an open-end common stock fund.
C) an open-end U.S. government bond fund.
D) a primary offering of a closed-end fund.


Answer: A) a closed-end fund in the secondary market.

Which of the following acts requires full and fair disclosure of all material information about equity and debt securities offered for the first time to the public?

Which of the following acts requires full and fair disclosure of all material information about equity and debt securities offered for the first time to the public?

A) Securities Exchange Act of 1934.
B) Trust Indenture Act of 1939.
C) Securities Investor Protection Act of 1970.
D) Securities Act of 1933.


Answer: D) Securities Act of 1933.

Which of the following are characteristics of the Securities Act of 1933?

Which of the following are characteristics of the Securities Act of 1933?

I. Requires registration of exchanges.
II. Called the Truth in Securities Act.
III.Requires full and fair disclosure of material facts.
IV. Enabled the Federal Reserve Board to determine margin requirements.

A) II and IV.
B) II and III.
C) I and II.
D) I and III.


Answer: B) II and III.