FINRA Series-7 - Series 7 General Securities Representative Qualification Examination (GS)

expected average life. The average life of a CMO is the length of time that each dollar of invested principal is expected to remain outstanding. Pricing of CMOs is based upon this factor.

adjustment bonds. These bonds are also known as income bonds. Interest is paid only if there is income.

the specific bid and offering terms of the issue. The bid and offering terms are determined after the syndicate letter to underwriters.

one hundred shares of MST traded on the exchange and appears out of order on the tape.

The ticker symbol followed by “SLD” means that the print is out of sequence.

income from extraordinary sources. Single events, such as the sale of property, do not affect basis.

$20,000. The equity in a short margin account is equal to the credit balance minus the short market value. SMA is not considered when computing equity.

5.00% net. The other quotes indicate moderate markups over cost. A quote of 5% net indicates a large markup and a price not “reasonably related to the market”. The dollar price would be about $125, a 25% markup over the dealer’s cost.

appreciation. That’s the correct term for increase in value.

up to but not including the settlement date. Accrued bond interest is always calculated up to but not including the settlement date. The interest accrual begins on the coupon date.

5.88%. The current yield is the annual interest divided by the price. The bond will pay $50 of interest per year ($1,000 face amount times 5%). Dividing by the price of $850 equals 5.88%.