Term
| Who solicits proxies for common stock? |
|
Definition
|
|
Term
| A common stock proxy provides someone with the ability to ________. |
|
Definition
| vote through voting power of attorney. |
|
|
Term
| Difference between Warrants and Rights |
|
Definition
Rights- allow current stockholders to purchase additional shares
Warrants- allows holder to buy shares of common at a predetermined price. |
|
|
Term
Rights are issued at a _______ and are considered ____-term.
Warrants are issued at a _______ and are considered ______-term. |
|
Definition
Rights are issued at a discount and are considered short-term.
Warrants are issued at a premium and are considered long-term. |
|
|
Term
| How does interest rate correlate with prepayment risk of CMOs? |
|
Definition
| A higher interest rate means there is a higher risk of prepayment. A lower interest rate risk means there is less risk of prepayment. |
|
|
Term
| On what does the credit risk of CMOs depend? |
|
Definition
| The collateral backing the security. |
|
|
Term
| What is the credit risk of a GNMA? What kind of security is a GNMA? |
|
Definition
| It's a collateralized mortgage obligation with a very low credit risk because it is backed by the US government. |
|
|
Term
| The bond with the most interest-rate risk or price volatility is the one with the ____est maturity and ___est coupon. |
|
Definition
| The bond with the most interest-rate risk or price volatility is the one with the longest maturity and lowest coupon. |
|
|
Term
| What is the penalty for failing to take the minimum distribution on an IRA and a Roth IRA? |
|
Definition
IRA has a 50% penalty
Roth IRA has no penalty |
|
|
Term
| Red Herring and Form Letter. Does one neither or both need principal approval? |
|
Definition
| Red Herring does not. It's used to obtain IOIs. Form letter is considered advertising so it does. |
|
|
Term
| What's the difference between a REIT's handling of cash dividends and that of a RELP/ DPP program in real estate? |
|
Definition
| A REIT, not a RELP, pays cash dividends that are taxable at the same rate as ordinary income. |
|
|
Term
| What has a higher yield: a treasury security or a Municipal security? |
|
Definition
| Treasury. Municipals are popular for their tax advantages, and this is why there are restrictions on municipalities investing their bond proceeds in treasury securities. |
|
|
Term
| A decline in GDP would hurt which stock more: cosmetic or transportation? |
|
Definition
| Transportation, which is very cyclical |
|
|
Term
| How are pension plans taxed? |
|
Definition
| Distributions from a pension plan are not tax-free and are typically considered ordinary income. |
|
|
Term
| How are withdrawals from a Variable Annuity taxed? |
|
Definition
| All earnings accrue tax-deferred. A withdrawal will be taxed on a LIFO method, meaning the earnings (last in) will be considered the first to be withdrawn. Earnings are taxed as ordinary income. Withdrawal of the invested amount is considered return of capital and is not taxed. |
|
|
Term
| At what age can Variable Annuity withdrawals begin? What kind of penalty would a premature withdrawal incur? |
|
Definition
| 59.5 years, 10% penalty on taxable portion |
|
|
Term
| The PSA model is used to price: |
|
Definition
|
|
Term
| What's a bona fide market maker? |
|
Definition
| A bona fide market maker is one who makes a market in over-the-counter stocks. |
|
|
Term
| What causes yield based calls to rise in value? In what situation are they an effective hedge? |
|
Definition
| Yield-based call options increase in value when interest rates rise, creating a viable hedge for a portfolio of long term bonds. |
|
|
Term
| Formula for Earnings per share |
|
Definition
| Earnings per share is equal to net income minus the preferred dividend divided by the number of common shares outstanding. |
|
|
Term
| A broker-dealer underwriting an IPO for a NYSE-listed company. The BD is required to deliver prospectuses for ___ days after the effective date. |
|
Definition
|
|
Term
| A 60-year-old individual has invested $30,000 in a nonqualified variable annuity. The annuity's value is currently $40,000. If the individual withdraws $20,000 and is in a 28% tax bracket, his tax liability will be: |
|
Definition
2800
20,000 (withdrawal) = 10,000 (gain that's taxable at 28%) + 10,000 (tax-free return of capital)
The 10,000 gain taxed at 28% accounts for the entire tax liability.
The amount invested in a nonqualified variable annuity may not be deducted from income. All earnings accrue tax-deferred. A withdrawal will be taxed on a LIFO method, meaning the earnings (last in) will be considered the first to be withdrawn. Earnings are taxed as ordinary income. Withdrawal of the invested amount is considered return of capital and is not taxed. The annuity has earnings of $10,000 and, therefore, $10,000 of the $20,000 withdrawn is taxable and the remaining $10,000 is considered return of capital. The tax liability is $2,800 ($10,000 taxable amount x 28% tax bracket). Had the individual been under 59 1/2 years of age when the withdrawal was made, the distribution also would have been subject to a 10% penalty on the taxable portion. |
|
|
Term
Keynesian Economic Theory:
1. Utilizes what to accomplish goals
2. Type of Policy
3. Who's responsible for implementing |
|
Definition
1. Taxes and Expenditures
2. Fiscal
3. Congress
The first part is most important, second and third are more for understanding. |
|
|
Term
Monetary Economic Theory:
1. Utilizes what to accomplish goals
2. Type of Policy
3. Who's responsible for implementing |
|
Definition
1. Money Supply
2. Monetary
3. Federal Reserve Board (FRB)
The first part is most important, second and third are more for understanding. |
|
|
Term
| The only rate directly controlled by Fed |
|
Definition
|
|
Term
What provides a back-up source of liquidity to
depository institutions on a short-term basis |
|
Definition
|
|
Term
| Four Stages of the Economic Cycle |
|
Definition
Expansion (aka Recovery)
Peak
Recession (aka Contraction)
Trough |
|
|
Term
| The _________ measures the prices of a fixed basket of goods bought by typical consumers |
|
Definition
| Consumer Price Index (CPI) |
|
|
Term
| Deflation vs. Disinflation |
|
Definition
| Deflation is a decline in the level of prices while Disinflation is a reduction in the rate of inflation. |
|
|
Term
| The difference between Growth and Defensive stocks in terms of BETA |
|
Definition
• When asset’s beta is more than 1: Asset outperforms when market is up, but underperforms when market is down (growth stock)
• When asset’s beta is less than 1: Asset under-performs when market is up, but outperforms when market is down (defensive stock) |
|
|
Term
| A head and shoulders top pattern is what type of indicator |
|
Definition
| Bearish; reversal of upward trend |
|
|
Term
| A head and shoulders bottom pattern is what type of indicator |
|
Definition
| Bullish; reversal of downward trend |
|
|
Term
| Dow Jones Composite Average: What is its composition (#s of what) |
|
Definition
| 65 Stocks: 30 Industrials, 20 Transportation and 15 Utilities |
|
|
Term
| When the DJIA declines 10% from the previous days close: Trading Halts for _________. |
|
Definition
|
|
Term
| When the DJIA declines 20% from the previous days close: Trading Halts for _________. |
|
Definition
|
|
Term
| When the DJIA declines 30% from the previous days close: Trading Halts for _________. |
|
Definition
|
|
Term
| When the DJIA declines 5% from the previous days close: Trading Halts for _________. |
|
Definition
| Trick question. It doesn't halt. |
|
|
Term
| Breakout of an level of support is a ______ indicator |
|
Definition
| Bearish indicator. Think about it. Stock has dropped below a level that it rarely does. |
|
|
Term
| Breakout through a level of resistance is a _______ indicator |
|
Definition
| Bullish indicator. Think about it. Stock has risen above a level that it rarely does. |
|
|
Term
| Short Interest. What is it, and what does a high amount indicate |
|
Definition
Amount of a company’s common stock sold
short, but not yet covered.
Large short interest is a bullish indicator |
|
|
Term
| Advance/Decline Figures. What is it and who would use it |
|
Definition
Measure of the number of stocks that have increased versus number of issues that have decreased (breadth of the market)
Technical Analyst |
|
|
Term
| How do you calculate Earnings per Share if you're given a shit ton of information to look at? |
|
Definition
Take your Earnings Before Interest and Taxes (EBIT).
Subtract Bond Interest.
Take that number and subtract Taxes. This is Net Income.
Subtract Preferred Dividend from Net Income.
Divide that number by Common Shares. |
|
|
Term
| Formula for Working Capital |
|
Definition
| Current Assets Minus Current Liabilities |
|
|
Term
|
Definition
| (Current Assets - Inventory) / Current Liabilities |
|
|
Term
| Simplified Formula for EPS |
|
Definition
| (Net Income – Preferred Dividend) / Common Shares Outstanding |
|
|
Term
|
Definition
Cash
Accounts Receivable
Marketable Securities
Inventory |
|
|
Term
| The 3 Current Liabilities |
|
Definition
Accounts Payable
Dividends Payable
Interest Payable |
|
|
Term
| Where does land fall on the balance sheet? |
|
Definition
|
|
Term
| Where do buildings fall on the balance sheet? |
|
Definition
|
|
Term
| Where does equipment fall on the balance sheet? |
|
Definition
|
|
Term
| Where does retained earnings fall on the balance sheet? |
|
Definition
|
|
Term
| Where do Notes (issued) fall on the balance sheet? |
|
Definition
|
|
Term
| Where does inventory fall on the balance sheet? |
|
Definition
|
|
Term
| Where does accounts receivable fall on the balance sheet? |
|
Definition
|
|
Term
| What's the basic Balance Sheet Formula |
|
Definition
ALE
Total Assets = Total Liabilities + Shareholder's Equity |
|
|
Term
|
Definition
A business venture designed to pass through both
income and losses to investors |
|
|
Term
| A limited partnership is an example of a |
|
Definition
| direct participation program |
|
|
Term
| A general partner of a DPP must at least ___% interest |
|
Definition
|
|
Term
| Order of priority during liquidation of a DPP |
|
Definition
Secured Lender
General Creditor
Limited Partner
General Partner |
|
|
Term
| 3 ways to endanger your Limited Partner role in a DPP |
|
Definition
1. Negotiating contracts
2. hiring /firing employees
3. lending your name |
|
|
Term
| Maximum Underwriting compensation of a DPP offering securities |
|
Definition
|
|
Term
| In a DPP: If a sponsor (GP) conducts a public offering of securities, what are the registration requirements if any: |
|
Definition
| Registration is required under the Securities Act of 1933 |
|
|
Term
| In a DPP: If a sponsor (GP) conducts a private placement of securities, what are the registration requirements if any: |
|
Definition
| Registration exemption; Reg. D offering to an unlimited number of accredited, but not more than 35 non-accredited |
|
|
Term
| The subscription agreement of a DPP states what three things: |
|
Definition
1. You've read it and understand the risks
2. You meet net worth, income, and suitability requirements
3. Who you can make the check out to |
|
|
Term
| When are Limited Partners considered entered into a DPP? |
|
Definition
Limited Partners are not accepted until the General
Partner signs (approves) their Subscription Agreement |
|
|
Term
| 3 advantages of a Limited Partnership |
|
Definition
1. Flow-through of income and expenses
2. Limited liability
3. Tax advantages such as TAX CREDITS for low income housing and TAX DEDUCTIONS for depreciation, depletion, and intangible drilling costs |
|
|
Term
| disadvantages of a Limited Partnership |
|
Definition
1. Lack of Liquidity
2. Need GP's approval to sell
3. Limited voting power
4. Effects of tax law changes
5. Increased Tax Complexity |
|
|
Term
| Riskiest and least risky type of Oil and Gas DPP? |
|
Definition
Riskiest is Wildcatting (Exploratory)
Least risky is Income (purchase existing wells) |
|
|
Term
| A limited partners basis in a DPP will increase for what 3 reasons |
|
Definition
| contributions, income reported, recourse loan (loan to the partnership) |
|
|
Term
| A limited partners basis in a DPP will increase for what 2 reasons |
|
Definition
Losses reported (passive losses)
Cash Distributed |
|
|
Term
| Are OTC securities Marginable? |
|
Definition
| No. Only listed securities on NYSE and Nasdaq |
|
|
Term
| How much stock must be deposited into a margin account to meet the Reg T requirement? |
|
Definition
Deposit Stock (equal to 2 times the Reg. T Call)
Basically twice what you're used to seeing on practice exam questions |
|
|
Term
| What can't you buy on margin? |
|
Definition
Unlisted, nonNasdaq securities
Options (100% requirement)
New Issues: IPOs and Mutual Fund Shares |
|
|
Term
|
Definition
| Equity in excess of 50% of the LMV. |
|
|
Term
| If you buy more stock in a margin account using your SMA, how does it affect your debit balance if at all? |
|
Definition
| It increases your Debit balance. |
|
|
Term
| How does SMA relate to buying power of a margin account? |
|
Definition
| SMA x 2 = buying power. In other words, if you're buying additional securities in your margin account, your buying power is twice your SMA. |
|
|
Term
| Relationship between A restricted margin account and maintenance requirements |
|
Definition
| An account is restricted if equity is less than 50% of market value. A maintenance call won't be issued until equity falls to a lower threshold, depending on long and short requirements. |
|
|
Term
| How does a voluntary cash deposit affect SMA and debit balance? |
|
Definition
| 100% reduces debit, 100% increases SMA |
|
|
Term
| How does sale of stock affect SMA and debit balance? |
|
Definition
| 100% reduces debit, and 50% recorded in SMA |
|
|
Term
| Maintenance requirement for Long Margin account |
|
Definition
| Equity must equal 25% of LMV. |
|
|
Term
| 3 Ways of remedying a maintenance call? |
|
Definition
Depositing Cash
Depositing fully paid marginable securities
Selling all or part of the position |
|
|
Term
| What's the credit balance in a Short Margin Account? |
|
Definition
Total short sale proceeds plus Reg. T on sale
Customer must deposit an amount equal
to 50% of short sale proceeds
e.g. Sell short 100 XYZ @ $50. Deposit $2500. Credit is $7500. This does NOT fluctuate with SMV. |
|
|
Term
| Maintenance requirement for Short Margin account |
|
Definition
| Equity must equal 30% of SMV. |
|
|
Term
| The required equity for a short sale where the stock is less than $5 per share |
|
Definition
| the greater of $2.50 per share or 100% of the market value. |
|
|
Term
| If you're buying $3,000 worth of ABC in a Long Margin Account, what's your initial requirement? |
|
Definition
| $2,000. (The lesser of $2,000 or 100% of the market value.) |
|
|
Term
| Minimum Initial Requirement in a Short Margin Account: |
|
Definition
50%
Stocks trading under 5? 2.50 per share or 100%, whichever's bigger |
|
|
Term
| ERISA applies to what type of employees? |
|
Definition
|
|
Term
| Keogh (HR-10): They are what and for whom? |
|
Definition
| Self Employed Retirement Plan |
|
|
Term
| SEPs : Stands for what? They are based on what type of income? |
|
Definition
| Simplified Employee Pension. Self Employment income. |
|
|
Term
| Keogh and SEP maximum contributions: |
|
Definition
For the self-employed, the maximum contribution is
20% of net income, not to exceed $52,000 |
|
|
Term
| The difference between contributions and vesting in Keogh and SEPs |
|
Definition
Keogh plans allow employees to make non-deductible
contributions; SEPs do not.
Keogh plans may follow a vesting schedule, while SEPs
require immediate vesting |
|
|
Term
| Who uses 401ks? What are the maximum contributions? Vesting? Matching? |
|
Definition
for any type of company (public or private)
Contribution limits change yearly. 2014 was 17,500. 2015 is 18,000.
Vesting follows a schedule. Employer can match but isn't required. |
|
|
Term
| Are IRA contributions Deductible? Roth IRA? |
|
Definition
Traditional IRA: Contributions MAY be deductible
Roth IRA: Contributions are NEVER deductible |
|
|
Term
| IRA / Roth IRA: Who can use them? |
|
Definition
Traditional IRA: contributions are always allowed
Roth IRA: Higher Income individuals can't contribute |
|
|
Term
| Withdrawal/Distribution Requirements of Roth IRA and Traditional IRA. Penalties for late withdrawal? |
|
Definition
Traditional IRA: Required by Apr. 1 following year the
owner reaches 70 ½ (50% penalty for failure)
Roth IRA: No requirement or penalty |
|
|
Term
| Taxation of withdrawals: IRA and Roth IRA |
|
Definition
Traditional IRA: withdrawals are taxable
Roth IRA: withdrawals are tax free |
|
|
Term
| Early withdrawals from IRA and Roth IRA |
|
Definition
| Before 59.5 yo, there's a 10% penalty on the TAXABLE amount of the withdrawal (taxable amount is amount in excess of contributions, or simply earnings) |
|
|
Term
| How do rollovers/transfers of IRAs/Roth IRAs work? |
|
Definition
Once a year max, you have 60 days to complete it.
More than once a year is allowed through a trustee to trustee transfer, where the individual doesn't have access to the funds. |
|
|
Term
|
Definition
| State-sponsored, COLLEGE savings plan |
|
|
Term
| How much can you gift someone without paying gift tax? What if you want to pay a lump sum instead of paying the max annually? Is anything different about Husbands and Wives gifting? |
|
Definition
| 14,000 dollars annually. Five years can be done at one time. Gifts can be doubled for married couples. Gifts BETWEEN married couples are unlimited. |
|
|
Term
| How are 529 distributions taxed? |
|
Definition
Federally tax-free if used for college
Distributions not used for college are subject to ordinary income taxes plus 10% penalty
If not used for a child's education, they can be transferred to an additional child's education. |
|
|
Term
| Coverdell: What is it? Contribution limits? How are contributions and withdrawals treated for tax purposes? |
|
Definition
Education Saving Account (not only college)
2,000 annually up to age 18
Non deductible contributions, but earnings are tax free if used for education. |
|
|
Term
| Simple definition: Non-Qualified Annuities |
|
Definition
A tax-deferred investment sponsored by an insurance
company. Can be variable or fixed. |
|
|
Term
| Non-Qualified Annuities: Contribution limits? Tax treatment of contributions and distributions? |
|
Definition
| No limit on amount that can be invested. Contributions are not deductible, but investment income grows tax-deferred |
|
|
Term
| Who has the investment risk in a variable annuity? |
|
Definition
|
|
Term
| Who has the investment risk in a fixed annuity? |
|
Definition
|
|
Term
| Are annuities a type of security? |
|
Definition
| A Variable Annuity is a security, but a Fixed Annuity is not. |
|
|
Term
| Are annuities good hedges against inflation? |
|
Definition
| Fixed annuities are not, but Variable annuities are great hedges against inflation. |
|
|
Term
| While still in the accumulation phase, an annuitant takes a withdrawals from their annuity. How is this withdrawal taxed? |
|
Definition
| Only the earnings portion is taxable |
|
|
Term
| What are the early withdrawal penalties on annuities? |
|
Definition
| Before 59.5 yo, 10% penalty on investment income. |
|
|
Term
| What are the 4 payout options in Annuities? |
|
Definition
Straight Life Annuity
Life Annuity with Period Certain
Joint and Last Survivor Annuity
Unit Refund Life Annuity |
|
|
Term
|
Definition
Annuitant receives payments for life
- Highest possible payout - highest risk |
|
|
Term
| Life Annuity with Period Certain |
|
Definition
| Payments are made to annuitant for life or to beneficiary (in the case of annuitant’s death) for specified minimum number of years |
|
|
Term
| Joint and Last Survivor Annuity |
|
Definition
| Payments are made for life so long as one annuitant is living |
|
|
Term
|
Definition
Annuitant receives an amount at least equal to their original investment
- At death, any remaining amount is paid to a beneficiary |
|
|
Term
| Qualified Annuities can be simply defined as: |
|
Definition
| Tax-Sheltered or Tax-Deferred Annuities (TSA/TDA) |
|
|
Term
| 403(b) Plans are a type of ______ for ______ |
|
Definition
| 403(b) Plans are a type of Qualified Annuity for public school employees and non-profit organizations. |
|
|
Term
| 457 Plans are a type of ______ for ______ |
|
Definition
| 457 Plans are a type of Qualified Annuity for employees of state and local governments. |
|
|
Term
403(b) Plans and 457 Plans are 2 types of _____ Contributions excluded from _______ ________
All income and gains are tax-_________
Payouts are taxed how/untaxed/?? |
|
Definition
Qualified Annuities
Contributions excluded from current income
All income and gains are tax-deferred
Payouts entirely taxed as ordinary income |
|
|
Term
| A 62-year old retired individual had contributed $10,000 into an annuity. This year, she received a lump-sum payment from the annuity of $16,000. What would be the taxable portion of the lump-sum if the account were a Qualified Annuity? Non-Qualified? |
|
Definition
Qualified: $16,000
(Qualified Contributions are excluded from current income, so they're taxed in the distribution period).
Non-Qualified: $6,000
(Contributions were not excluded from current income, so only the $6,000 gain is taxable) |
|
|
Term
| The 3 Types of Investment Companies |
|
Definition
Face Amount Certificate Company
Unit Investment Trust Company
Management Company |
|
|
Term
| What does a Face Amount Certificate Company do? |
|
Definition
| It issues debt certificates. The issuer promises face value at maturity or surrender value if presented prior to maturity. |
|
|
Term
| What's the very brief (think 2 bullet points) breakdown of a Unit Investment Trust Company? |
|
Definition
Supervised, not managed (no management fee)
Portfolio generally remains fixed for life of the trust |
|
|
Term
| A Mutual Fund is a(n) ____-____ _____, which is a type of ______ Company. |
|
Definition
| Open-End Fund, or Management Company |
|
|
Term
| Shares of a Mutual Fund are sold at what price? |
|
Definition
| Sold at NAV + sales charge (if any) |
|
|
Term
| In what market do Mutual Fund shares trade? |
|
Definition
| The Primary Market, because they're redeemed. |
|
|
Term
| What requirements must be met to sell Mutual Funds short? |
|
Definition
| Mutual Funds cannot be sold short. |
|
|
Term
| When Closed-End Fund Shares trade in the secondary market, can a commission, markup, both or neither be added? |
|
Definition
| Commission OR Mark-Up can be added. They can trade at a discount or premium to NAV. Shares are issued ONCE, so they trade according to supply and demand. |
|
|
Term
| When can shares of a Closed-End Fund be redeemed? |
|
Definition
| They aren't redeemed. Only Open-End Fund Shares are redeemed. Instead of redeeming them, you trade them in the secondary market. |
|
|
Term
| Can you sell short shares of Management Companies. |
|
Definition
| If the Management Company is a Closed-End Fund, then yes. Open-End Funds/Mutual Funds cannot be sold short. |
|
|
Term
| How Liquid are shares of a Mutual Fund? |
|
Definition
| Redemption at Net Asset Value (NAV) within 7 calendar days |
|
|
Term
| How often is NAV calculated for a Mutual Fund? |
|
Definition
|
|
Term
| True or False: Reinvestment in a mutual fund at NAV is a tax-free exchange. |
|
Definition
| False. Reinvestment of earnings at NAV is a taxable event. |
|
|
Term
| What's the breakdown of Sales Charges and Taxation of switching/exchanges within a Mutual Fund Family? |
|
Definition
| Switching/Exchanging is permitted within family without sales charges, but the IRS will tax any resulting gains. |
|
|
Term
| In the Context of a Mutual Fund, explain the term Dollar-Cost Averaging? |
|
Definition
Same dollar amount invested regardless of share price
Usually results in average cost being less than the
average price |
|
|
Term
| Mutual Funds: What does a Growth Fund Invest in? Who is it suitable for? |
|
Definition
| Invest in common stocks for long-term investors seeking capital appreciation |
|
|
Term
| Mutual Funds: What does a Income Fund Invest in? Who is it suitable for? |
|
Definition
| Primarily invest in bonds (possibly some dividend paying stocks) for investors who desire current income |
|
|
Term
| Mutual Funds: What does a Sector (Specialized) Fund Invest in? Who is it suitable for? |
|
Definition
| Invest in one industry or geographic area for investors willing to assume more risk for a higher potential return |
|
|
Term
| Mutual Funds: What does a Money Market Fund Invest in? Who is it suitable for? |
|
Definition
| Invest in cash equivalents (money market instruments) for short-term investors seeking liquidity and safety |
|
|
Term
| Mutual Funds: What does a Balanced Fund Invest in? |
|
Definition
| Invests in both stocks and debt instruments |
|
|
Term
| Name the Five Types of Mutual Funds |
|
Definition
Growth Fund
Income Fund
Sector (or Specialized) Fund
Money Market Fund
Balanced Fund |
|
|
Term
| Index Funds vs. ETFs: Portfolio Composition of each |
|
Definition
Index Funds: Portfolio consists of a basket of securities which mirror an index (Low expenses)
ETFs: Portfolio consists of a basket of securities which mirror an index (Low expenses) |
|
|
Term
| Index Funds vs. ETFs: Getting rid of your shares? Short Sales? |
|
Definition
Index Funds: Shares are redeemed back to fund; cannot be sold short
ETFs: Shares trade in the secondary market; may be sold short |
|
|
Term
| Index Funds vs. ETFs: Transactional expenses |
|
Definition
Index Funds: Usually have no sales load
ETFs: Commission is paid on trade |
|
|
Term
| Index Funds vs. ETFs: How often are they priced |
|
Definition
Index Funds: Forward priced, once daily
ETFs: Intra-day pricing |
|
|
Term
| Index Funds vs. ETFs: Marginable? |
|
Definition
Index Funds: Cannot be purchased on margin
ETFs: May be purchased on margin |
|
|
Term
| Mutual Fund Sales Charges: Limit |
|
Definition
| Industry rules prohibit assessing charges in excess of 8.5% of the Public Offering Price (POP) |
|
|
Term
| Explain the B/A spread of a no load fund. What fee can a no load fund actually charge? |
|
Definition
NAV = POP, so B/A spread looks non-existent.
They can charge a redemption fee |
|
|
Term
| Mutual Fund Expense Ratio, quick definition. What's the largest component? How are sales charges factored in? |
|
Definition
the percentage of a fund’s assets paid for operating expenses and management fees
Management fee is the largest part.
Sales charges aren't included! |
|
|
Term
| Formula for Sales Charge % on a Mutual Fund |
|
Definition
|
|
Term
You're looking at a table of Mutual Funds and you notice that one fund has a POP that's less than its NAV.
What are you likely looking at? |
|
Definition
| A Closed-End Fund that's selling at a discount. |
|
|
Term
You're looking at a table of Mutual Funds and you notice that one fund has a POP that's significantly higher than its NAV.
What are you likely looking at? |
|
Definition
| A Closed-End Fund that's selling at a premium. |
|
|
Term
| When given the NAV and sales charge percentage, how do you calculate the POP? |
|
Definition
NAV / (100-Sales%)
ex. 50 NAV, 5% Sales Charge, calculate POP
50 / .95 = 52.63 |
|
|
Term
| Mutual Fund Letters of Intent: Time Frame and amount you can backdate |
|
Definition
| 13 months, backdated 90 days |
|
|
Term
| In order to charge 8.5% sales charge, a Mutual Fund must offer what two things? |
|
Definition
| Breakpoints and Letters of Intent. |
|
|
Term
| What are the two big prohibited practices for RRs selling Mutual Fund Shares? |
|
Definition
| Breakpoint Sales and Selling Dividends |
|
|
Term
|
Definition
| A company that manages a portfolio of real estate investments to earn profits for shareholders, but is NOT an investment company. |
|
|
Term
|
Definition
| Tax Benefit: No taxation on income if 90% is distributed |
|
|
Term
| Biggest difference between REITs and DPPs is: |
|
Definition
| Unlike Limited Partnerships (DPPs), REITs have no flow-through of losses |
|
|
Term
Regarding REITs:
1. Registration Requirements?
2. Where do they trade?
3. Marginable? Sell Short?
4. Attractive to investors seeking _______ |
|
Definition
1. Subject to registration requirements of the Act of 1933
2. Secondary Market like a stock
3. Yes, Yes
4. Attractive to investors seeking Current Income. |
|
|
Term
| Qualifying cash dividends are taxed at ____%. |
|
Definition
| Qualifying cash dividends are taxed at 15% |
|
|
Term
| Taxes paid on foreign dividends can be used as_______ |
|
Definition
Taxes paid on foreign dividends can be used as a tax
credit or as a deduction |
|
|
Term
| The Holding Period on Inherited Securities is |
|
Definition
|
|
Term
| The Recipient of gifted securities has a tax(cost) basis of |
|
Definition
| the market price or the cost basis of the gifter, whichever is less |
|
|
Term
|
Definition
A sale of bonds to realize a capital loss followed (sometimes
preceded) by a purchase of similar bonds. Used for tax purposes by offsetting capital gains. |
|
|
Term
| If an investor sells a security that has depreciated, how long do they have to reinvest, while still maintaining the capital loss? (This is a Wash Rule Question) |
|
Definition
| 30 days. Option positions are not a workaround. |
|
|
Term
Dividend Exclusion Rule:
for a corporation receiving dividends from another corporation’s common or preferred stock: How much stock is excluded based on ownership percentage? (There are only two categories) |
|
Definition
Ownership of Less than 20%: 70% of dividend is excluded
Ownership of Greater than 20%: 80% of dividend is excluded |
|
|
Term
| Answer with 2 Options Positions:If an investor is Mildly bullish, wants limited risk, & willing to accept limited gain |
|
Definition
| Establish Call Debit Spread or Put Credit Spread |
|
|
Term
Answer with 2 Options Positions:If an investor is Mildly bearish, wants limited risk,
& willing to accept limited gain |
|
Definition
| Establish Call Credit Spread or Put Debit Spread |
|
|
Term
| Equity Options expire at: |
|
Definition
| 11:59 PM ET (Eastern Time) on the Saturday following the third Friday of the expiration month |
|
|
Term
| Equity Options cease trading at: |
|
Definition
| 4:00 PM ET on the business day before expiration |
|
|
Term
| Equity Options must be exercised by submitting an exercise notice to a broker by: |
|
Definition
| 5:30 PM ET on the business day before expiration |
|
|
Term
| Within ____ days after the ROP’s approval, client must sign and return Options Account Agreement |
|
Definition
| Within 15 days after the ROP’s approval, client must sign and return Options Account Agreement |
|
|
Term
Someone who wishes to hedge a portfolio of
preferred stocks would buy:
Interest Rate Option ______
Yield Based Option _______ |
|
Definition
Yield Based Calls
Interest Rated Based Puts |
|
|
Term
| Yield Based Options are based on |
|
Definition
| Based on the yield of a Treasury security, not its price |
|
|
Term
| If you believe interest rates will decline, what are the most appropriate option positions? |
|
Definition
| Buy interest rate calls or Sell interest rate puts |
|
|
Term
| If you believe interest rates will rise, what are the most appropriate option positions? |
|
Definition
| Buy interest rate puts or sell interest rate calls |
|
|
Term
| Exercise of World Currency Options are settled in _______, and exercised _______ style. |
|
Definition
| U.S. dollar-settled, European style exercise |
|
|
Term
A speculator believes the euro will rally and therefore buys 1 Euro June 160 call at 3.35. How much does the premium cost?
If the Euro is at 166, what's the in-the-money amount? |
|
Definition
Cost: $335. A point is a dollar.
In-the-money amount: If the euro is 166 cents ($1.66) at expiration, the call is worth $600 (A 160 call with the euro at 166 is 6 points in-the-money x $100) |
|
|
Term
| Length of a standard equity option |
|
Definition
|
|
Term
MSRB rules are enforced for Broker Dealers by:
MSRB rules are enforced for Bank Dealers by: |
|
Definition
Broker Dealers: FINRA, SEC
Bank Dealers: Comptroller of the Currency, FRB, or FDIC |
|
|
Term
| Municipal Securities Representative Apprenticeship Period: Length, and who can they deal with, how can they be be paid |
|
Definition
| 90 days, deal with other municipal professionals, paid by salary not commission |
|
|
Term
| Resolution and complaints maintained by the Municipal Principal for: |
|
Definition
| Resolution and complaints maintained by the Municipal Principal for six years |
|
|
Term
| If a Municipal Securities Dealer employs someone with a control relationship with an issuer, they must disclose the relationship IN WHICH 3 WAYS if a customer is interested in investing in one of the issues |
|
Definition
Disclose relationship, at least orally, before the trade
Disclose relationship in writing at or prior to settlement
And if for a discretionary account, obtain the customer’s
specific, written permission |
|
|
Term
| How much can a Municipal Securities professional contribute to a political candidate for whom they may vote? |
|
Definition
|
|
Term
| When a bond purchased with a Secondary Market Discount is sold or redeemed, the accreted market discount is taxed as: |
|
Definition
|
|
Term
| Municipal GO Bonds: What are the tax sources for bond coverage? |
|
Definition
State Sales and Income Taxes.
Local Ad Valorem/Property Taxes |
|
|
Term
| As they don't need voter approval, Revenue bonds use this instead: |
|
Definition
|
|
Term
| Are revenue and GO bonds subject to debt limits |
|
Definition
| GO bonds are, Revenue bonds are not |
|
|
Term
| Revenue Bond analysis will examine what 3 factors |
|
Definition
Revenue Bond analysis will examine revenue, operating
costs and competition from similar projects |
|
|
Term
| Special Tax Revenue Bonds are covered by what |
|
Definition
| Excise taxes on purchases such as gasoline, tobacco, and liquor |
|
|
Term
| Special Assessment Revenue bonds are covered by what |
|
Definition
| Assessments on the benefited properties; used for sidewalks, sewers, etc. |
|
|
Term
Name the Type of Bond and the source of debt service:
Moral Obligation Bond |
|
Definition
Revenue Bond
If project revenue is insufficient, state legislature is morally, but not, legally obligated for shortfall. |
|
|
Term
Name the Type of Bond and the source of debt service:
Double-Barreled Bond |
|
Definition
Revenue Bond
Project Revenue
Tax Dollars (G.O.) |
|
|
Term
Name the Type of Bond and the source of debt service:
Industrial Development Revenue Bond |
|
Definition
Revenue Bond
Lease agreements (payments) with a
corporate user of the facility
The credit rating is only as good as
the Corporation
May be subject to the AMT |
|
|
Term
| What's a rate covenant on a revenue bond |
|
Definition
| Pledge to maintain user fees at a level sufficient to meet debt service and other obligations |
|
|
Term
| Name the four instruments used for short term municipal financing |
|
Definition
Tax Anticipation Notes (TAN)
• Revenue Anticipation Notes (RAN)
• Bond Anticipation Notes (BAN)
• Grant Anticipation Notes (GAN) |
|
|
Term
| What are the Ratings for Municipal Notes assigned by S&P and Moody's |
|
Definition
SP1, SP2, SP3
MIG1, MIG2, MIG3, MIG4 |
|
|
Term
| Variable Rate Demand Obligation (VRDO): |
|
Definition
Debt security offering a variable rate of interest that is adjusted at specified intervals (such as daily, weekly, or monthly)
Holders can redeem for par plus accrued interest at any time
that rates are reset |
|
|
Term
| What are the 3 Municipal Documents |
|
Definition
| Official Statement, Legal Opinion, Indenture |
|
|
Term
| Municipal Issue Official Statement contains: |
|
Definition
Info about the issuer and purpose. It is not required.
If it exists, it's the BD's responsibility to distribute it |
|
|
Term
| Municipal Issue Legal Opinion contains (is unqualified or qualified better): |
|
Definition
Issuer’s legal, valid and enforceable obligation
Tax exempt status of the issue
“Unqualified” opinion is better than a “qualified” opinion |
|
|
Term
| Municipal Issue Indenture (AKA ?) what does it address |
|
Definition
aka bond resolution...A contract which addresses the legal protections afforded the bondholders and terms of the issue, such as:
• Coupons
• Maturity
• Call provisions
• Covenants |
|
|
Term
| Revenue Bonds are USUALLY what type of underwriting |
|
Definition
|
|
Term
| General Obligation Bonds are USUALLY what type of underwriting |
|
Definition
|
|
Term
Priority of Orders in an Offering
(Rank these: Group- Net, Designated, Member, Pre-Sale) |
|
Definition
Remember the acronym PGDM
1. Pre-Sale
2. Group Net
3. Designated
4. Member |
|
|
Term
| Components of the Spread How do they fit together |
|
Definition
| Manager's Fee Risk/Additional Takedown Selling Concession The latter two are known as the total takedown Manager gets his fee no matter who sells. Sales Concession goes to WHOMEVER makes a particular sale. Additional Takedown goes to the Selling Group, unless the Manager sells, then he gets it. Sounds confusing but makes sense when you see it. |
|
|
Term
| The 3 Bond Buyer Indexes are called what? What do they consist of? |
|
Definition
20 Bond: 20 GOs with 20 yr maturities. Avg rtg of AA or Aa2
11 Bond: 11 from the 20 with avg rtg of AA+ or Aa1
25 Bond: 25 Revenue Bonds with 30 Year maturities. Avg rtg of A+ or A1 |
|
|
Term
| Bond Buyer Visible Supply? Compiled how often? |
|
Definition
| Total par value of both negotiated and competitive issues expected to reach the market within next 30 days. Compiled daily. |
|
|
Term
| Bond Buyer Placement Ratio? Compiled how often? |
|
Definition
Par value sold (placed) versus total par value that was
available for sale. Compiled Weekly. |
|
|
Term
| What's the one type of Non-Market, Non-negotiable Government Security? (there's no secondary market, only buy and sell with us gov) |
|
Definition
|
|
Term
T-Bills
Maturities:
Denominations:
Interest:
How they're initially sold: |
|
Definition
T-Bills
Maturities: up to 1 yr
Denominations: multiples of $100
Interest: Discount security, trades without accrued interest!
How they're initially sold: weekly auction |
|
|
Term
T-Notes
Maturities:
Denominations:
Interest:
How they're initially sold: |
|
Definition
T-Notes
Maturities:
Denominations: multiples of $100
Interest: stated annually, paid semi annually
How they're initially sold: periodic auction |
|
|
Term
T-Bonds
Maturities:
Denominations:
Interest:
How they're initially sold: |
|
Definition
T-Bonds
Maturities:
Denominations: multiples of $100
Interest: stated annually, paid semi annually
How they're initially sold: periodic auction |
|
|
Term
| Treasury Notes, Treasury Bonds, and Agency Securities (GNMA, etc.) are quoted as: |
|
Definition
| Treasury Notes, Treasury Bonds, and Agency Securities (GNMA, etc.) are quoted as: A percentage of par and fraction – 1/32 |
|
|
Term
| Accrued Interest on Government AGENCY securities is computed in annual terms of 360 or 365 |
|
Definition
360, registration exempt
FYI: quoted in 32nds, accrued interest(360days/yr) |
|
|
Term
| 3 government agency mortgage securities |
|
Definition
GNMA, FNMA, FHLMC
FYI: quoted in 32nds, accrued interest(360days/yr) |
|
|
Term
| the government agency securities for student loans, just an acronym |
|
Definition
SLMA
FYI: quoted in 32nds, accrued interest(360days/yr) |
|
|
Term
| The government agency securities for farming agriculture, just an acronym |
|
Definition
FFCB
FYI: quoted in 32nds, accrued interest(360days/yr) |
|
|
Term
| The term "tranches" is most closely aligned with what type of security? |
|
Definition
|
|
Term
|
Definition
Collateralized Mortgage Obligations
A mortgage-backed bond created by dividing mortgage
pools (GNMA, FNMA, FHLMC, not SLMA) into various
bond classes (tranches). |
|
|
Term
| When is interest and principal paid on CMOs? How is it taxed |
|
Definition
• Interest is generally paid monthly (fully taxable), with
principal paid sequentially |
|
|
Term
| CMO advertising must be filed with FINRA when? What can it not contain? |
|
Definition
Filed with FINRA 10 business days prior to use
No comparison to any other investment |
|
|
Term
| CMOs: What does the Planned Amortization Tranche provide? |
|
Definition
| Provides the most predictable cash flow and maturity |
|
|
Term
| CMOs: What does the Support or Companion Tranche provide? |
|
Definition
| Provides the least predictable cash flow and maturity |
|
|
Term
| CMOs: What's unique about the Z-Tranche? |
|
Definition
| It's the last tranche to receive payments. |
|
|
Term
| Money Market instruments have a maturity of ______ |
|
Definition
|
|
Term
| Negotiable CDs have a minimum deposit of |
|
Definition
|
|
Term
| 5 Principal Types of Money Market Instruments |
|
Definition
T-Bills
Bankers Acceptances
Commercial Paper
Negotiable CDs
Repurchase Agreements |
|
|
Term
Long Term / Brokered CDs
Maturities (range):
Callable?:
Liquidity: |
|
Definition
2-20 year maturities.
may be callable
Liquidity can be limited |
|
|
Term
| Corporate Debt can be ___ or un____. Un____ debt is also referred to as a _____. |
|
Definition
| Corporate debt can be secured or unsecured. Unsecured debt s also referred to as a debenture. |
|
|
Term
Income (Adjustment) Bonds
Sold at Premium/Par/Discount?
Receive Interest payments when?
Accrued Interest? |
|
Definition
Deep Discount
No promise of interest payments unless income is sufficient
trade flat w/o accrued interest |
|
|
Term
Eurodollar Bond
Issued where?
Pays interest and principal in what currencies?
Registration reqs?
Can it trade in the US secondary market? If so, when? |
|
Definition
Issued outside the US
Pays interest and principal in US Dollars
Exempt from SEC registration
Can trade in the US secondary market after 40 days |
|
|
Term
Yankee Bond
Foreign or US bond issued in the US or outside the US?
Interest and Principal in what currencies?
Registration?
Can it trade in the US secondary market? If so, when? |
|
Definition
Foreign bonds issued in the the United States
Pays interest and principal in U.S. dollars
Must be SEC registered
May trade in the U.S. market immediately |
|
|
Term
| The term "phantom interest" is most closely aligned with what type of security? |
|
Definition
|
|
Term
| How is accrued interest calculated on zero coupon bonds? |
|
Definition
| They trade without accrued interest (trade flat). |
|
|
Term
| How often is the cost basis accreted on a zero coupon bond? |
|
Definition
|
|
Term
| Who might find a zero coupon bond attractive? Who might not? |
|
Definition
| Attractive for those planning for a specific investment goal (e.g. college funding or retirement), but not for those who desire current cash flow. |
|
|
Term
| What types of bonds calculate accrued interest on a 30/360 schedule? |
|
Definition
Corporates, Municipals and Government Agencies
Everything but T-Notes and T-Bonds! |
|
|
Term
| What types of bonds calculate accrued interest on a month/365 schedule? |
|
Definition
| U.S. Government T-Notes and T-Bonds |
|
|
Term
| Interest payments and bond prices are stated as |
|
Definition
|
|
Term
When interest rates change which bonds have the largest
price change? |
|
Definition
| Longest Maturity, Lowest Coupon |
|
|
Term
| S&P/Fitch Corporate Bond Ratings |
|
Definition
AAA
AA
A
BBB
BB -speculative
B -speculative |
|
|
Term
| What's the lowest S&P rating for an investment grade corporate Bond? |
|
Definition
|
|
Term
| Moody's Corporate Bond Ratings |
|
Definition
Aaa
Aa
A
Baa
Ba-speculative
B -speculative |
|
|
Term
| From which two places can the money come from in order for a corporation to call its outstanding bonds? |
|
Definition
| Sinking Funds or Refunding Issues |
|
|
Term
| What can be said about the credit risk of pre-refunded Corporate Bonds? |
|
Definition
|
|
Term
| Callable Bonds selling at a discount are quoted using Yield...: |
|
Definition
|
|
Term
| Callable Bonds selling at a premium are quoted using Yield... |
|
Definition
|
|
Term
| Pre-refunded bonds always are quoted using Yield... |
|
Definition
|
|
Term
| FINRA Uniform Practice Code deals with |
|
Definition
|
|
Term
| FINRA Conduct Rules deal with |
|
Definition
|
|
Term
| When does a Principal have to approve correspondence? |
|
Definition
| Not preapproved, but only subject to review |
|
|
Term
| Correspondence is defined as |
|
Definition
| Communication with EXISTING customers and/or fewer than 25 prospects within a month |
|
|
Term
| When must Options and CMO advertising be filed with FINRA |
|
Definition
|
|
Term
| Mutual fund advertising and sales literature must be filed with FINRA.... |
|
Definition
| Within 10 business days of initial use |
|
|
Term
|
Definition
| Firms not executing based upon a firm quote. Can be sanctioned. |
|
|
Term
|
Definition
| The prohibited practice of insertion of a third party between customer and best market |
|
|
Term
| 3 that are exempt from 5% markup policy |
|
Definition
| municipals, new issues, mutual fund shares |
|
|
Term
| Which types of orders are reduced when a stock trades ex dividend? |
|
Definition
Buy Limit
Sell Stop
Sell Stop Limit |
|
|
Term
| Dealers charge a markup when they act as a ? |
|
Definition
|
|
Term
| Dealers charge a commission when they act as a? |
|
Definition
|
|
Term
| When is payment generally due for Government and Municipal Securities? |
|
Definition
Government and Municipal securities are exempt from
Reg. T; payment is generally due at settlement |
|
|
Term
Settlement and Payment Dates: Corporate Securities in a
cash or margin account |
|
Definition
Settlement and Payment Dates: Corporate Securities in a
cash or margin account
Settlement: T+3
Payment: 5 biz days |
|
|
Term
| Settlement and Payment Dates: Municipal Securities |
|
Definition
Settlement and Payment Dates: Municipal Securities
Settlement: T+3
Payment: at settlement |
|
|
Term
Settlement and Payment Dates:U.S. Government
Securities |
|
Definition
Settlement and Payment Dates:U.S. Government
Securities
Settlement: T+1
Payment: at settlement |
|
|
Term
| Settlement and Payment Dates: Option trades |
|
Definition
Settlement and Payment Dates: Option trades
Settlement: T+1
Payment: 5 biz days (tricky) |
|
|
Term
| Ex-Dividend Date is usually ____ ___ ____ the record date. |
|
Definition
| 2 days before the record date |
|
|
Term
| SuperDOT is used for what |
|
Definition
|
|
Term
| What type of order can't a specialist accept? |
|
Definition
|
|
Term
| The OTC market is negotiated/competitive? and has ____ market makers. |
|
Definition
| The OTC market is negotiated and has unlimited market makers. |
|
|
Term
|
Definition
| Inside market only (Highest bid – Lowest asked/ offer) without identifying the market maker |
|
|
Term
|
Definition
| Quotes of all market makers that deal in the security |
|
|
Term
|
Definition
| The same as level 2, but it allows market makers the ability to change their quote |
|
|
Term
| Definition of Third Market |
|
Definition
| Listed securities traded OTC using CQS, included in NYSE Volume totals |
|
|
Term
| Definition of Fourth Market |
|
Definition
| Transactions between Institutions. |
|
|
Term
|
Definition
| Trading Ahead of Client Orders. Prohibited under Act of 1934 |
|
|
Term
|
Definition
| creating a misleading appearance of trading Prohibited under Act of 1934 |
|
|
Term
|
Definition
| manipulative activity used to keep a price from falling. Prohibited under Act of 1934 |
|
|
Term
|
Definition
| manipulative activity used to keep a price from rising. Prohibited under Act of 1934 |
|
|
Term
Insider Regulation from Act of 1934:
Any officer or director of issuer or greater than ___% owner
Must register with SEC within ___days |
|
Definition
|
|
Term
Act of 1934:
Insiders cannot____ _____ or keep ____ _____ _____ |
|
Definition
| sell short, or keep short swing profits (held <6mos) |
|
|
Term
|
Definition
If inside information is disclosed to an individual who
does not have a fiduciary relationship with the company,
the information must be disseminated to the public.
If disclosure was accidental, it must be publicly disseminated within 24 hours.
If the disclosure will be intentional, e.g. a conference
call, the information must be released simultaneously |
|
|
Term
|
Definition
Permits sales of certain unregistered securities to “Qualified
Institutional Buyers” (QIBs)
• Minimum $100 million under management |
|
|
Term
|
Definition
Permits the sale of restricted and control stock:
Restricted Stock: Six month holding period
"Control" Stock (affiliated or >10% holder): no holding period
To sell: File form with SEC, and sell within 90 days. Maximum amt you can sell is the greater of 1% OR avg volume over last 4 weeks |
|
|
Term
|
Definition
| Private Placement: Purchasers sign investment letter. Unlimited Accredited Investors, no more than 35 non-accredited. |
|
|
Term
|
Definition
Intrastate Exemption: All investors must be in state, as well as 80% of company assets, revenues
No resale to non residents for 9 months |
|
|
Term
|
Definition
Small Issue exemption:
-Capital limitation of no more than $5,000,000 raised over
12-months
-"Offering Circular” disclosure document |
|
|
Term
| When stabilizing the issue, Syndicate manager places one bid (unqualified) to buy the securities at a price ______ |
|
Definition
|
|
Term
| How long is the new issue cooling off period |
|
Definition
|
|
Term
|
Definition
Firm Commitment
Best Efforts
Best Efforts; All or None
Best Efforts; Mini Maxi
Stand-By |
|
|
Term
| Real Time Reporting System is used for what (RTRS) |
|
Definition
| Municipal Bond trading reporting |
|
|
Term
| Order Audit Trail System (OATS) |
|
Definition
| A system that supports NASDAQ SingleBook. Used for NASDAQ and OTC |
|
|
Term
Health Savings Account
Tax treatment of...
Contributions, Growth, Withdrawals
Who's elligible |
|
Definition
Contributions:Tax deductible
Growth: tax free
Withdrawals: tax freefor qualified medical expenses
Who can enroll:Those with high-deductible health plans, not enrolled in Medicare or a dependent on a person's tax return. |
|
|
Term
|
Definition
economic indicators intended to determine the level of economic activity six to nine months from the time.
e.g. stuff w/ manufacturing higher up the chain, interest rate |
|
|
Term
|
Definition
Simultaneous with business cycle
e.g. industrial production, manufacturing and trade sales |
|
|
Term
|
Definition
confirm long term trends in the economy, but do not predict them.
e.g. unemployment duration, consumer price index for services, prime rate |
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Term
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Definition
| Party sells a security agreeing to repurchase it at a later date at a higher price. |
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Term
| Reverse Repurchase Agreement |
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Definition
| Party buys a security agreeing to resell it at a later date at a higher price. |
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Term
| Which annuity is funded with after-tax dollars - Qualified or Non-Qualified? |
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Definition
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Term
| In a Non-Qualified Annuity, how is the payout taxed? |
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Definition
| Only the earnings portion is subject to tax as ordinary income |
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Term
| _________________ is the payout option that provides payments for the annuitant's whole life and will cease at death. |
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Definition
| Straight-Life is the payout option that provides payments for the annuitant's whole life and will cease at death. |
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Term
| What is the benefit of the Straight-Life payout option to the annuitant? |
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Definition
| This option provides the highest monthly income. |
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Term
| What modification is made to the Straight-Life payout option to guarantee payments for a minimum number of years? |
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Definition
| Straight-Life with Period Certain |
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Term
| Life Insurance: What payout option requires the insurance company to provide payments for as long as one of two people remain alive? |
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Definition
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Term
| Joan invests $15,000 in a qualified annuity. At age 64, she withdraws all $22,000. What's Joan's basis; what's taxed? |
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Definition
| Her basis is zero, since the annuity is qualified (funded pre-tax) and the entire $22,000 is taxed as ordinary income. |
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Term
| Ann invests $15,000 in a non-qualified annuity. At age 64, she withdraws all $22,000. What's Ann's basis; what's taxed? |
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Definition
| Her basis is $15,000 since the annuity is funded after-tax and the $7,000 of earnings would be taxed as ordinary income. |
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Term
| In an non-qualified annuity, how is a single distribution taxed? |
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Definition
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Term
| True or False: The AIR is a guaranteed minimum rate of return. |
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Definition
| False. The AIR is a benchmark rate that is not guaranteed. |
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Term
| True or False: Performance must be negative for a variable annuity's payment to fall. |
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Definition
| False. Performance below the AIR will cause the payment to fall, even if the investment result was positive. |
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Term
| What technique can be used to roll assets from one annuity into another without taxation? |
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Definition
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Term
| Is switching between annuity sub-accounts taxable? |
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Definition
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Term
| Prospectus delivery is required for all ___________ insurance contracts. |
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Definition
| Prospectus delivery is required for all variable insurance contracts. |
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Term
| Does a variable life policy have a guaranteed minimum death benefit? |
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Definition
| Yes. Regardless of account performance, the minimum DB is paid (typically, the initial DB listed on the policy's face). |
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Term
| True or False: Variable annuities are subject to registration requirements of the Act of 1933 and sold by prospectus. |
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Definition
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Term
| Certificate of Participation |
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Definition
| A type of financing where an investor purchases a share of the lease revenues of a program rather than the bond being secured by those revenues. |
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Term
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Definition
| Federal tax aimed at ensuring that wealthy individuals and corporations pay at least some income tax. |
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Term
An investor shorts a stock at $6 per share. What is the SRO minimum maintenance requirement for this position?
- $1.50 per share
- $1.80 per share
- $3.00 per share
- $5.00 per share
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Definition
d. $5.00 per share
The SRO minimum maintenance requirement for a stock sold short at $5 per share or above is $5 per share or 30% of the market value, whichever is greater. |
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Term
| IRA contibutions are made in pretax or after tax dollars? What about a Roth IRA? |
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Definition
| IRA is pretax, Roth IRA is after tax |
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Term
A customer has a Roth IRA with total assets of $350,000. When the customer is 65, how much may be withdrawn from this account tax-free?
None of the funds
All of the funds
$35,000
$175,000 |
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Definition
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Term
What type of risk do zero-coupon bonds eliminate?
Credit risk
Purchasing power risk
Reinvestment risk
Market risk |
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Definition
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Term
| Debentures will often be sold with _________ to educe the interest rate on an issue of debentures |
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Definition
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Term
| For an OID (original issue discount), the discount is considered _________ |
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Definition
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Term
| For a non-OID (a secondary market discount), the discount is reported as _________ |
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Definition
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Term
| How are Roth IRA distributions taxed? |
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Definition
| Tax Free because contributions are in after tax dollars |
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Term
| Treasury Strips are a type of ________ bond. |
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Definition
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Term
| True or False: ETNs pay a fixed coupon. |
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Definition
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Term
| The advance-decline theory states that it is bullish if |
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Definition
| more stocks go up than go down during the day |
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Term
| _____ is a type of bond, typically created through a lease agreement |
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Definition
| Certificate of Participation |
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Term
| What is the SRO maintenance requirement on a $1 million purchase of a 2x Long Gold Index ETF? |
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Definition
| $500,000 (25% of market value x the 2x multiplier) |
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Term
| Which authority approves an over-the-counter stock for purchase on margin? |
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Definition
| The Federal Reserve Board |
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Term
| A municipal tombstone advertisement must be approved by: |
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Definition
| Municipal Securities Principal |
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Term
| When a corporation seeks a bank loan, the bank will base its charge to the corporation on the: |
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Definition
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