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Question 1

How often must Investment companies issue financial statements to shareholders?

Options :

A : monthly

B : quarterly

C : semi-annually

D : annually

Answer: C

Question 2

Hypothecation usually refers to which of the following?

Options :

A : forecasting the market based upon past performance

B : pledging securities as collateral

C : determining a reasonable offering price for a new issue

D : none of the above

Answer: B

Question 3

In June, Bubba bought 100 shares of XYZ at $35. In November, he bought a listed put in XYZ with a $35 strike price and a July expiration for a premium of $600. In April, Bubba exercises the put option and uses his stock for delivery

What is his resulting tax consequence?

Options :

A : a $600 capital loss

B : neither profit nor loss

C : cannot be determined without knowing the market price of XYZ upon exercise

D : this is a wash sale and cannot be included in the investor’s tax calculations

Answer: A

Question 4

Which of the following best describes phantom income?

Options :

A : income from deductions and tax credits

B : the non-taxable portion of a distribution

C : income received but not reported

D : income reported but not received

Answer: D

Question 5

Bubba is age 54 and has investments in a retirement plan with his former employer valued

at $104,500. Bubba withdraws $25,000 to open a retail clothing store.

Which of the following statements is true regarding Bubba’s tax consequences?

Options :

A : the entire account is terminated and $104,500 is immediately taxable

B : a penalty of 10% of the withdrawn amount is assessed

C : a penalty of 10% on all assets in Bubba’s account is assessed

Answer: B