Question 1

A call option is in the money when the market value of the underlying stock is:

Options :

A : lower than the strike price of the option

B : the same as the strike price of the option

C : higher than the strike price of the option

D : higher than the strike price plus the premium

Answer: C

Question 2

What is the importance of the “at risk” rule?

Options :

A : it limits deductions to the amount at risk

B : it limits liability to the amount at risk

C : deductions for interest may not exceed investment income

D : it prevents carry forward of disallowed interest deductions

Answer: A

Question 3

A NYSE floor member executing an order for a public customer asks the specialist in the stock to guarantee a price while giving the customer an opportunity to obtain a better price. This procedure is known as:

Options :

A : a stop order

B : stopping stock

C : floor protection

D : a special deal

Answer: B

Question 4

On which of the following is depreciation permitted?

Options :

A : rental property whose value is declining

B : residential property not used for business

C : property whose maintenance exceeds the investment credit

D : equipment subject to recapture

Answer: B

Question 5

Which of the following pays interest at maturity only?

Options :

A : a corporate serial bond

B : US treasury bills

C : Income bonds

D : Series H savings bonds

Answer: B