65 Flashcards
(161 cards)
1
Q
Common Stock
A
Equity (ownership) Security
Security Growth / Cap appreciation
Voting rights not on officers; CEO CFO etc or diviends
Can vote on recap, merger, board of directors,
2
Q
How do you ensure get a dividend on a common stock purchase
A
You have to be an owner of the stock by the end of the day on the record date
Trade day plus 2 days to settle
3
Q
No rights to get a dividend on common stock is called and who determines the date?
A
Ex-dividend date Finra does that
The company does not record ex-dividend dates
4
Q
Corporate Bond
A
Maximum income for investors - risk determined by credit rating
AAA - OK Strong rating investment grade
Double BB no way junk bond credit risk
5
Q
Purchase a bond at a discount - how does that affect the income/interest?
A
No effect on interest - It’s a fixed INCOME securities
Does affect my ROI or yield higher return
6
Q
Bond at a discount how does affect the yield and how to calculate? Annual income is $50 and the market price is $900
A
Increases the yield
$50/$900
7
Q
How to calculate YTM bought it 980 - income is $40
A
20/10 $2 per year plus or if called earlier 5 years 20/5 $4
8
Q
Who decides the Credit Risk on Bonds
A
Moodys. Standard and Poor and Finch
A speculative bond junk bond is bb
3 letters has to be good bond
9
Q
Fundamental analysis of stocks
A
based on company financials
Assets Liabilites Balance sheets
P/E income statements
10
Q
Tech analysis
A
charts - resistance and support levels
trends
11
Q
Discounted cash flow
A
Coupon, principal, and maturity of dates
12
Q
What is an analysis of equity securities
A
Dividend Discount Model
13
Q
Top down Method Analysis
A
Looking at Economy, Industry , Company
14
Q
Bottom Up Method Analysis
A
Company Industry Economy
15
Q
Government Bonds Types and Investment Strategy
A
Cap preservation,
Bills 1,3, 6, 12 months
Notes 2-10 years
Bonds 10 plus yrs
16
Q
Government Bond Risks
A
Interest and Reinvestment risk
17
Q
TIPS - Treasury Inflation
A
Adjusted by CPI- semi-annual
example 1000 principal coupon 4% Inflation 3%
1030x 40 = income
18
Q
How is a TIPS adjusted with inflation
A
CPI increase by 5% - so $1050 on the cost of the bond principal
19
Q
Yankee Bonds/ Euro dollar bond
A
Foreign gov bonds- Foreign issued
20
Q
Brady Bond
A
Foreign debt- US security
21
Q
Municipality Bonds Good for what investor
A
Federal tax-exempt on the income /interest
No state in the residing state is issued
Suitable for the highest tax brackets
tax-free on the Interest only and not the capital gains
22
Q
Corp Bond tax equivalent yield
A
Muni Yield /tax bracket of investor = equivalent tax-free yield
23
Q
Cash and Cash Equivalent
A
Money Market, CD,
24
Q
Money Market Open end
A
Highly, Liquid low risk, not FDIC, Safe income
Short-term parking money for 1 year or less
Can Not Sell Short
Money Market shares sold are redeemed by the fund and they issue new shares
25
NAV Net Asset value per share Calculation
total worth of fund minus expenses = net value
Net value/total number share is the price of the share bought at NAV plus sales charge max allows 8.5% for sales charge
26
Closed-end Fund Money Market
Share issued once and traded on the secondary market if the price fluctuates it can be an closed-end fund traded on the market in comparison to the NAV
Active Management
27
ETF
traded secondary market sold at NAV and sales charge
Mirrors an Index
Lowest expenses
Passive management
28
REIT
Pool of RE holdings secuirty 1934 act
Income INVESTORS
29
Options
Calls up Bullish rights to buy
Puts down market rights to sell
30
Options Hedge strategy
Its to protect the stock OR for Income never both
31
Futures Contracts
Options on commodities agriculture
right to buy or sell in a specified time and quantity
Buy to consume
sell lock in price to sell
Example farmer sell futures to lock in wheat price
32
Forwards
Unreg. unregistered
purchase Institutional /only private sellers
hard to close the position- illiquid
33
Limited Partnership
Passive Investment
General Partner Manages
Not liquid
Number one reason for a viable/profitable business to investment
34
Hedge Funds
loosely reg investment co
NOT mutual fund
Uses Options to speculate or derverivtatives or buy on margin
35
Structured Investment ELN Equity linked Note
Debt instrument linked to an equity index
36
debt security that has 270 days or less to mature?
Commercial Paper exempt security to register
face value above 50K
37
Which form is submitted annually for corporate books and records for shareholders?
10-k
38
Red herring Offering
pre prospectus during the 20 day cooling period before reg with SEC for a security
39
tombstone ad
Notice of sale - NOT AN AD
40
EFAE Index suitability
broad International investment fund
41
Pre-org certificates
no more than 10 subscribers ONLY no accredited investors
42
"Qualified Individual" for vulnerable adults
is any supervisor agent/IAR compliance officer or legal capacity - managers directors partners that are registered and are to handle these situations
43
restricted shares are exempt through which form?
Form 44
44
How is the GDP measured
All goods and services in constant dollars- no inflation accounted
45
Keynesian Economics Believe
governments should closely monitor: interest rates, tax rates, and social programs
46
Futures
exchange-traded and regulated, can be closed easily more liquid
47
Fixed annuity investment risk
Inflation
48
Variable annuity
sub-account/separate accounts in stocks and bonds not guarantee non-qualified annuity after-tax money- taxed on LIFO on ordinary income no inflation risk
min guarantee death benefit no guarantee on the investments
49
Variable Annuity linked to an Index
Equity based annuity
nonqualified better tax situation
50
STRIPS
Long-term bond zero coupon -suitable for baby savings for college- reinvestment risk because no income is being paid and you have to wait for all your money
51
Variable Universal Life
flexible prem. No guarantee on death benefit or investment
52
Simple trust is taxed when?
Distributes annually and taxed annually
53
Complex trusts are taxed when ?
only if they distribute income
54
who settles /sets up a trust
settler , grantor
55
Beneficiaries of a trust that pass away and their share goes to?
Per stripes /remainderman
56
Beneficiaries of a trust that pass away got to?
Per stripes /remainderman
57
Trust "Prudent Man Rule"
The trustee must manage the account on the stated investment objective in the trust agreement
58
What form does a trust file for taxes ?
1041
59
Corp balance sheet Asset Formula
Assets ( all RE) investments, cash, Jewelry-
Debt- Consumer debt, mortgages, car loans
60
Statement of cash flow on Corp balance sheet
Cash- investment income, rental income -
Debt tax utilities, mortgage payments
61
What is the most important investment OBJ. for recommendation?
Stated Investment OBJ of the client
62
Client recommendations, safety
US debt securities
63
Client recommendations, income
Corp. Bond REIT, Preferred Stocks
64
Client recommendations, growth
Common stocks, long term horizen
65
What is the time horizon of people goin to retire?
Life expectancy left when going to retire
66
Futures Contracts
Options on commodities agriculture
right to buy or sell in a specified time and quantity
Buy to consume
sell lock-in price to sell
For example, farmer sell futures to lock in wheat price
67
Extention Risk is for what security?
Mortgage-backed securities
68
Hedge Fund Risks
Market, legislative and liquity risk
69
What is Regulation D for?
An exempt transaction for Restricted shares
70
Strategic Asset Allocation
Long term planning but must rebalanced when markets change
71
Tactical Asset Allocation
timing the market
72
active management of portfolio
Are choosing what is best for the portfolio currently
73
Passive management
Are typically index funds and ETF's/ Buy hold
74
Primary security that avoids interest rate risk while producing income
Short term bonds
75
Federal reserve tools for monetary policies
REG T, Open market and reserve requirements, discount rate (money loaned to the banks)
Open markets is the primary tool used
76
Rights
Intrinsic value and have immediate benefits
77
Warrants
not issued with intrinsic value - give investors the right (but not obligation) to purchase company stock at a specific price within a specified time period.
78
Default Risk
Only debt securities - not being able to pay interest
79
Who decides the Credit Risk of Bonds
Moodys. Standard and Poor and Finch
A speculative bond junk bond is bb
3 letters has to be good bond
80
Common Stock Risks
Regulatory risk, liquidity risk and purchasing power risk
81
ADR Risks
ownership in a foreign company - currency risk because the income has to be converted from the other currency and a strong dollar would reduce the income exchange
82
Capm use what risk
Utilizes beta
83
Acid test ratio (current ratio)
Current Assets- Inventory/ liabilities =Current ratio
Current assets and inventory are considered within a year
84
What is the main risk of the OTC market?
Liquidity risk because it can hard to sell in this market with unregistered securities
85
Coverdells
Age req. to 18 used by 30
Income phase outs
After tax money tax free- funds not used for school 10% penalty
Any education level
86
529 plan
10k for high school
tax-free money coming out
No income contribution phase-out
Funds not used for education 10% penalty
87
Average cost single category for tax
ONLY avail. to mutual funds - once elected can not be changed until entire account is liquidated
88
Political Risks
Foreign risks of government
89
Who is considered an insider at a corporation?
directors, officers, and 10% shareholder
90
Discounted cash techniques are used for?
will purchase the highest NPV which indicated its trading at a discount
Negative NPV is trading at a premium and more expensive than its worth
91
POA
Given the ability for trades and withdrawals, IAR can get 10 days of verbal approval before a written POA
BD must get a written POA no verbal accepted
92
Limited POA
trades no withdrawls
93
POA from security accounts access
Given the ability for trades and withdrawals, IAR can get 10 days of verbal approval before a written POA
BD must get a written POA with no verbally accepted
94
Strategic
95
Efficient market theory
weak - only price and volume
semi strong- all publicly known financials price volume will reflect in the price
Strong- all inside and public info is known and will reflect in the price - no analysis will help you decide because all information is shown the price
96
Modern Portfolio Theory
Diversification through different asset classes negatively correlated
97
Growth Stocks
High P/E, no dividends, earnings
98
Value Stocks
Low P/E, high dividends, stable earnings
99
Highest Diversification
Negative correlation greatest -10 example
100
What RE can you put in an IRA ?
ONLY BUSINESS PROPERTIES- no personal
101
What cannot be in IRA for investments
Life insurance, Muni bonds (tax-free in a tax deferred plan) Art and collectibles
US gold coins yes can be in an IRA!
102
QDRO qualified divorce order
Whoever receives the asset has no 10% early withdrawal penalty
103
How is alimony taxed ?
Included in AGI
104
How is child support taxed ?
Non taxable
105
Erisa Plan require?
Min 3 plan choices, conservative moderate and aggresive
106
IPS Investment Policy Statement
Not required - provided to the plan participants- no investment choices are included by the advisor and does NOT include the Summary plan doc.
107
Summary Plan document for Employee benefit programs
Provided by the plan sponsor and is required
108
Totten Trust or POD
Assets will be transferred on death, example grandpa want to leave asset to the grandkid but still have access while he is alive, then it goes to grandkid
109
529 plan
110
Coverdell max contribution
111
UGMA
One custodian and One Minor - No limit to gift a child- age of the majority (legal age) will be fully in the minor's name- irrevocable
112
Max gift
15k donor pays tax
113
utma
Minor receives it at 25 could say age of majority
114
Market Makers
Bringing buyers and seller together in an exchange in OTC must be with Finra
115
Specialists
Bringing buyers and seller together in an exchange -ex. NYSE
116
Stop Orders- Conditional
If/then
3 step program
1) does the client own "buy" it or want to "sell"
2) Do they believe it bullish or bearish
3)
SL BS above market value
Bs BS below market value
117
Who oversees the extension of credit in the exchange
Federal Reserve Bank FRB- regulation
118
Insider trading enforcement act 1986
everyone involved knowingly used insider information
fee: 1m / 3x profits Tippy and tipper rule applies to any information inside the actual corporation there is Chinese wall material information
119
What form does a non-exempt issuer ( company) use to register with the USA?
U10
120
Who is a fiduciary?
IA ---------NOT a BD
121
Who advice is incidental to their occupation when giving securities advice?
LATE - Lawyers, Attorneys, Teachers, Engineers
If they charge any fee for advice they must register
122
What is the common method of security reg with the USA for security
Coordination- state and federal registration - done at the same time and send all the same paperwork
Effective when the SEC clears the security and doesn't have to be both
123
The security offered in one state interstate how does it get registered?
They register by qualification
124
NSMIA
Fed covered Advisor
Fed covered Security
125
Filing Notice for which securities?
Federally covered securities - notice filing is with the state ONLY for fees still req of fed reg securities
126
Who is exempt from registering
US government, bank, nonprofit, Canadian, muni, foreign gov.
127
What qualifies as Exempt transactions- unregistered
Unsolicited, between institutions, private placements (accredited investors)
128
Legislative risk
about any investment that has tax advantages
129
Regulatory risk
Government change the rules or laws on something Example FDA make an approval change for a drug
130
Covered calls
Income play
131
8k form
Is filed when a company has a material event
132
Which investment is the most tax efficient?
Index fund
133
Modern Portfolio Theory
Max return in risk - Market risk reduction
134
Credit Risk
Default risk- government bonds are lowest default risk
135
Liquidity Risk
hard to sell, private placement / forward contracts
136
What is not a sale of security in the USA ?
Bona fide loan of securties
137
3rd party solicitor has to give clients?
Disclosure of compensation, ADV part 2 Broshure , and broshure on soliciter signed by client
138
How do you calculate the future cash flow of a bond?
Need # of payments, principal and what the nominal yield or interest will be
139
Who is not a person according to the USA ?
Minor, deceased, legally incompetent
140
Equity Index Annuity
No negative reset ever
141
What are federally covered securities?
Mutual fund, register with the SEC
142
What hedges Inflation risk?
Tangible assets, precious metals (copper is not a precious metal), TIPS
143
What is the best way to depict time-weighted return?
The volatility of the holdings
144
order in which creditors are paid
Bonds, unsecured bonds, preferred, common, unsecured and secured
145
Largest payout for annuity
Straight lIfe only
146
Current Ratio
Assets minus liabilities /current liabilities
147
Time value of money
Taking a lump sum or getting paid over a period time
Money worth today versus money worth in the future
148
Regulation T
Margin account 50% required
149
Class A share of Mutual Fund
Front loaded, long term investor, 8.5% max LOI
Breakpoints - ILLegal to sale a breakpoint
150
Class B Mutual Fund
Deferred Contingent sales charges
151
Class C
Promotional fees
152
Derivatives
Options and Futures
153
true or false ETF purchased on Margin
True, can not purchase Mutual funds on Margin
154
General Partnership Risk
Liquity must get permission form GP to get out
155
How are the assets selected in a UIT, Unit investment trust
Professionally selected
156
UIT is governed by which Act?
Securities Act of 1933- they are a primary offering
can not buy on margin
157
Rebalancing
is investing constant dollar into to different asset classes
158
Equivalent Tax free Yield
Divide the tax free yield by the investor tax bracket
159
Calculate the taxable yield
Multiply the yield by the tax bracket of the investor
160
Gift between Spouses
Unlimited amount
161
What 3 types of investments does the Investment Act of 1940 regulate?
MGMT co. , Unit investment trusts and face amount certificates
