1. An investor is nearing retirement and holds 90% of his investment portfolio in stock and 10% in bonds and projects that he will need additional monthly income. The investor's registered representative may suggest which of the following strategies to help the investor achieve their goals?
A. Dollar-cost averaging
B. Hedging the portfolio
C. Liquidating the portfolio
D. Rebalancing the portfolio Correct
Explanation
Rebalancing the portfolio to increase bonds or income-generating assets can provide stable monthly income for retirement. Dollar-cost averaging is for investing over time, hedging reduces risk but not income, and liquidation is too drastic. This aligns with the investor's need for income stability.
2. A customer buys 1,000 shares of XYZ stock at $35.00 per share for $10. How many shares of XYZ will the customer own after the reverse stock split?
A. 10 shares
B. 100 shares Correct
C. 1,000 shares
D. 10,000 shares
Explanation
The question likely refers to a 10-for-1 reverse stock split (implied by the $10 price discrepancy), reducing 1,000 shares to 100 shares. The price per share increases proportionally, maintaining portfolio value. This reflects the mechanics of reverse stock splits.
3. Which of the following corporate actions is mandatory for the investor?
A. A buyback
B. A bond call Correct
C. A rights offer
D. A purchase offer
Explanation
A bond call is mandatory, as the issuer can redeem bonds before maturity, requiring investors to surrender them. Buybacks, rights offers, and purchase offers are optional for investors. This ensures compliance with bond terms.
4. Which of the following statements describes authorized shares of a corporation?
A. Authorized shares are always greater than outstanding shares.
B. Authorized shares are only permitted to be purchased by existing shareholders.
C. Authorized shares are the total number of shares that a corporation is permitted to issue. Correct
D. Authorized shares are permitted to be increased with approval of the corporation's board of directors.
Explanation
Authorized shares are the total number a corporation is permitted to issue, as set by its charter. They are not always greater than outstanding shares, not restricted to existing shareholders, and increases typically require shareholder approval. This defines corporate share structure.
5. Which of the following information is required to be included in an official statement of a new municipal bond?
A. Interest rate Correct
B. Payment guarantee statement
C. Tax advice on investing in municipal bonds
D. Ratings for past securities issued by the issuer
Explanation
The official statement for a municipal bond must include the interest rate, as it defines the bond's yield. Payment guarantees, tax advice, and past ratings are not mandatory. This ensures transparency for investors.