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Finra Exam Series-63 Topic 2 Question 11 Discussion

Actual exam question for Finra's Series-63 exam
Question #: 11
Topic #: 2
[All Series-63 Questions]

Rich Quick is a broker-dealer registered in the state of Massachusetts. He occasionally trades on abnormalities he observes in bond yield spreads for his own account, short selling a bond that appears to be overpriced based on its yield and buying a bond that is identical in almost every respect except for the price, which is less than that of the other bond. He has been able to earn arbitrage profits 95% of the time when he does this. Rich Quick

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Suggested Answer: B

If Rich Quick is able to earn profits 95% of the time by trading on abnormalities he observes in bond yield spreads, he is skilled. There is nothing illegal in what he is doing. Arbitrageurs attempt to earn profits when they observe what they believe to be mispriced securities, and this is an accepted activity. Rich is not using insider information; bond yields are publicly available information.


by Isaiah at Jul 06, 2025, 12:28 PM

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Mozell
6 days ago
I think Rich Quick is taking advantage of his skills and knowledge in bond trading.
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India
6 days ago
95% success rate? Dang, that guy's got some skills. I wish I could pull that off legally.
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Chantell
7 days ago
B) is skilled if he is able to earn profits 95% of the time using this strategy.
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Burma
16 days ago
Wait, arbitrage is prohibited? That's news to me. Guess Rich Quick is in hot water.
upvoted 0 times
Helaine
4 days ago
B) is trading on insider information, which is a violation of securities laws.
upvoted 0 times
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Stephanie
9 days ago
A) is in violation of securities laws. Arbitrage is a prohibited activity.
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Hermila
11 days ago
B) is skilled if he is able to earn profits 95% of the time using this strategy.
upvoted 0 times
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