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NEW QUESTION 47
Bubba sells 100 shares of XYZ short at $58 and buys 1 XYZ Mar 60 Call at $3.
What is the customer's maximum loss?

  • A. $100
  • B. $500
  • C. $5,500
  • D. unlimited

Answer: B

Explanation:
$500. Bubba sold short at $58. The call with a strike price of 60, gives him the right to buy back the stock at $60. If the stock rises, the call can be used to limit the loss to 2 points. Bubba can lose $200 on the stock. Bubba also paid a $300 premium. Loss potential is $500.

 

NEW QUESTION 48
Under Regulation T, when must money be deposited to cover requirements for Bubba's new purchases on margin?

  • A. on the next business day following the trades
  • B. no later than the seventh business day after the trades
  • C. on the day of the trades
  • D. no later than the fifth business day after the trades

Answer: D

Explanation:
Explanation/Reference:
Explanation: no later than the fifth business day after the trades. Bubba should pay up no later than the fifth business day.

 

NEW QUESTION 49
Bubba buys one XYZ June 40 call for $1,000 and sells one XYZ March 40 call for $600. Subsequently, the June call is closed for $1,200 and the March call for $900.
What is Bubba's net result?

  • A. $200 profit
  • B. $200 loss
  • C. $100 loss
  • D. $100 profit

Answer: C

Explanation:
Explanation/Reference:
Explanation: $100 profit. The long position in the June call is a $200 profit ($1,200 - $1,000). The short position in the March call is a $300 loss ($900 - $300). Combining the gain and loss results in a $100 loss.

 

NEW QUESTION 50
Bubba buys an OTC stock from a firm that is a market -maker in the stock.
What may be said about the price he pays?

  • A. it includes a commission and a markup
  • B. it does not include a markup
  • C. it includes a special fee
  • D. it includes a markup

Answer: D

Explanation:
it includes a markup. A market-maker acts as principal. Therefore, Bubba pays a markup but not a commission.

 

NEW QUESTION 51
Most publicly owned securities are:

  • A. over-the-counter
  • B. unregistered
  • C. exempt from SEC registration requirements
  • D. listed

Answer: A

Explanation:
over-the-counter. The OTC market is much larger than any listed markets.

 

NEW QUESTION 52
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