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CSI Canadian Securities Course Exam 1 Sample Questions (Q88-Q93):
NEW QUESTION # 88
What is theImpact from a security price increase on the investorholding a long margin position?
- A. The investor must immediately pay interest on the excess margin amount
- B. The investor will incur a loss equivalent lo the difference be-ween the purchase and sale price.
- C. The Investor must provide additional funds to cover the price difference
- D. The investor has access to additional funds from the account available for withdrawal.
Answer: D
Explanation:
When a security price increases in a long margin position, the equity in the margin account increases. The investor gains additional buying power and may withdraw excess margin, which represents the difference between the current equity and the margin requirement.
* Option A:Incorrect; the investor would incur gains, not losses.
* Option B:Incorrect; interest is charged on borrowed amounts, not excess margin.
* Option C:Incorrect; additional funds are not required when equity rises.
NEW QUESTION # 89
Under which circumstance is an option considered to be in-the-money?
- A. When a put option with the price of the underlying asset is higher than the strike price.
- B. When a call option with the price of the underlying asset is lower than the strike price.
- C. When a put option with the price of the underlying asset is higher than the strike price.
- D. When a put option with the price of the underlying asset is higher than the strike price.
Answer: C
Explanation:
An option is "in-the-money" when it has intrinsic value:
* For aput option, it is in-the-money when the underlying asset's price isbelowthe strike price, allowing the holder to sell the asset at a higher price (strike price).
Incorrect options clarify the following:
* A call option is in-the-money when the underlying asset's price isabovethe strike price.
NEW QUESTION # 90
Whatis typically a key tax attribute of dividends?
- A. Dividends from preferred shares are ineligible tot dividend tax credit.
- B. Stock dividends are treated differently than regular cash dividends for tax purposes.
- C. Dividend income istaxed more preferentiallythan interest income.
- D. Reinvested dividends arenon-taxable to the shareholders.
Answer: C
Explanation:
Dividends are taxed at a preferential rate in Canada due to thedividend tax credit, which reduces the effective tax rate on dividend income. This is intended to prevent double taxation because corporations have already paid taxes on their profits before distributing dividends to shareholders.
* B. Dividends from preferred shares are ineligible for the dividend tax credit: This is incorrect; dividends from both common and preferred shares are eligible for the dividend tax credit.
* C. Stock dividends are treated differently than regular cash dividends for tax purposes: Stock dividends are generally taxed similarly to cash dividends.
* D. Reinvested dividends are non-taxable to the shareholders: Reinvested dividends are taxable in the year they are earned, even if reinvested.
NEW QUESTION # 91
TDF Dealer's liability desk purchases 5,000 shares of a stock with a market order at $15 bid, $15.20 ask. The desk later sells the shares with a market order at $15.25 bid, $15.40 ask. What is TDP Dealer's gain on the trades?
- A. $250.
- B. $1,250
- C. $2,000.
- D. $1, 000.
Answer: D
Explanation:
The gain is calculated as:
* Buying Price:5,000 shares purchased at $15.20 = $76,000.
* Selling Price:5,000 shares sold at $15.25 = $76,250.
* Profit Calculation:$76,250 - $76,000 =$1,000.
This reflects the gain from executing the market orders at the respective bid-ask prices.
NEW QUESTION # 92
Anwar is placing a market order to purchase 100 shares of AJLwhen the bid/ask is $10.25."$ 10.75. Before the trade is complete, the bid/ask moves to $10.207S1Q70. Whatis the share pricethat Anwar will pay on the purchase transaction?
- A. $10.70
- B. $10.29
- C. $10.75
- D. $10.20
Answer: A
Explanation:
A market order executes immediately at the best availableask pricefor a purchase transaction. In this case, the bid/ask initially was $10.25/$10.75. However, before execution, the ask price updated to $10.70, meaning Anwar will pay $10.70 per share.
* B. $10.75: This was the previous ask price but is no longer valid after the update.
* C. $10.29: This value is not relevant to the current bid/ask spread.
* D. $10.20: This represents the updated bid price, which applies to sell orders, not buy orders.
NEW QUESTION # 93
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