11: OTHER PACKAGED PRODUCTS (138)

Question 1

Do LPs require a subscription agreement?

Answer 1

Yes

Question 2

Do REITs provide passive income?

Answer 2

No

they provide portfolio income because REITS are securities

Question 3

Do CMOs provide passive income

Answer 3

No

Since it’s a secuirty, portfolio income

Question 4

What is the name for income recieved from securities?

Answer 4

“portfolio income”

Question 5

Do DPPs provide passive income?

Answer 5

Yes

Question 6

T/F: Non-recourse financing entitles the lender to repayment only from the profits of the project which the loan is funding. Not any assets

Answer 6

True

Question 7

T/F: Non-recourse financing typically requires substantial collateral and a higher interest rate

Answer 7

True

Question 8

Public Securities Association Standard Prepayment Model (PSA)

Answer 8

The PSA standard prepayment model is used to estimate the prepayment risk associated with asset backed securities and mortgage backed securities.

Question 9

Period Certain Annuity

Answer 9

pays out cash flows during the annuitization phase for a set number of years.
This can be contrasted with a guaranteed lifetime annuity that pays out until the annuitant dies, which is an uncertain period of time.
Because of the certainty with a period certainty option, these generally pay out higher monthly or annual cash flows than a life annuity.

Question 10

1035 Exchange (annuities)

Answer 10

Lets you exchange annuity plans without paying income taxes
Funds must go directly from old annuity to new one
(so you don’t get a check from the old annuity to buy the new one)

Question 11

Fixed assets

Answer 11

assets which are purchased for long-term use and are not likely to be converted quickly into cash, such as land, buildings, and equipment.

Question 12

Trade Reporting and Compliance Engine (TRACE)

Answer 12

a facility for reporting OTC bond market trades and data.
Because OTC markets are often less liquid, less regulated, and more opaque than listed trading on exchanges, TRACE provides much needed information to provide a more transparent and fair marketplace.

Question 13

Retained earnings

Answer 13

amount of net income left over for the business after it has paid out dividends to its shareholders.

Question 14

Are mutual funds and ETFs closed end or open end funds?

Answer 14

Open end funds

They can issue more shares whenever they want

Question 15

T/F: donor income limits apply to 529 plans (education savings)

Answer 15

False, no donor income limits for 529 plan

> Unlike the Coverdell ESA, there are no donor income limits with a 529 plan

Question 16

T/F: Unit investment trusts are redeemable

Answer 16

True, UITs redeemable

UITs, just as mutual funds, offer redeemable securities, and both types of investment companies compute their NAV.