General Review II Flashcards
(35 cards)
Once filed, a shelf registration is good for _ and allows the issuer to sell portions of a registered shelf offering over the _ period without having to reregister the security. However, a supplemental prospectus must be filed with the SEC before each sale.
two years/two-year
A well-known seasoned issuer (WKSI) may have a three year period.
Fill in the blank: A _ order instructs that the order be filled in its entirety and immediately. If there are insufficient shares available to fill this order, it will be canceled and nothing is done.
fill-or-kill (FOK)
True of false) Principal paid on a loan reduces taxable income for a limited partnership.
False: Principal paid on a loan reduces both the cash and the loan balance. It is not a cost for tax purposes. Interest is a cost. Depreciation and depletion are examples of deductions from income that are not actual costs; these reduce taxable income but do not represent a cash payment.
Fill in the blank: The _ (often a bank) for a corporation is responsible for ensuring that its securities are issued in the correct owner’s name, canceling old and issuing new certificates, maintaining records of ownership, and handling problems relating to lost, stolen, or destroyed certificates. Acting as an intermediary in a trade is the function of the _ .
transfer agent; clearing corporation
Which of the following securities are most likely deemed marginable by either the Federal Reserve Board (FRB) or regulatory bodies such as Financial Industry Regulatory Authority (FINRA) and the NYSE?
A) Listed options that expire in 9 months, B)Treasury bonds, C) Rights certificates, D) Exchange-listed stock currently being offered to the public by prospectus
B) Treasury bonds;
Although Treasury securities are exempt from FRB Regulation T, they are OTC securities approved by the FRB as being good collateral for loans. If these exempt securities are bought or sold in a margin account, the firm determines the initial deposit requirement.
True or false: Whether long or short the contract, all call contracts are in the money when the market price is above the strike price.
True: Stock price – XP = IV of a call (or, the in-the-money amount). It cannot drop below zero.
Operating income shown on a P&L statement is sometimes referred to as
earnings before interest and taxes (EBIT)
net sales - cost of good sold - operating expenses = EBIT
These customers are exempt from the penny stock suitability statement requirement but not the disclosure requirements.
established customers have either,
* held an account with the BD for at least one year (and has made a deposit of funds or securities) OR
* made at least three penny stock purchases of different issuers on different days.
those not recommended by the BD or the registered representative (RR)—are exempt from the rules on suitability and disclosure for penny stocks
unsolicited transactions
What is a rights offering?
A rights offering allows stockholders to purchase common stock below the current market price.
It provides existing shareholders an opportunity to maintain their ownership percentage.
How are rights valued in a rights offering?
The rights are valued separately from the stock and trade in the secondary market during the subscription period.
This trading typically occurs over a period of 30 to 45 days.
What do existing shareholders receive in a rights offering?
Existing shareholders receive one right per share owned.
This allows them to participate in the new share offering.
What determines the number of rights needed to purchase one share in a rights offering?
The number of rights required to purchase one share of the new issue depends on:
* The number of outstanding shares
* The number of new shares offered
This ratio can vary significantly based on the specific offering.
True or False: Rights offerings are only available to new investors.
False
Rights offerings are specifically designed for existing shareholders.
Fill in the blank: The subscription period for rights offerings is typically _______.
30 to 45 days
Which of the following risks is not a nonsystematic risk?
A)Legislative risk
B)Business risk
C)Interest rate risk
D)Default risk
Interest rate changes impact the price of all debt securities, meaning that it is a systematic risk. The others listed here are examples of nonsystematic risks.
What is systematic risk?
Systematic risk is generally caused by factors that affect all businesses, such as war, global security threats, or inflation.
Systematic risk impacts all businesses and securities, regardless of their strength.
Can diversification protect investors from systemic risk?
No, diversification cannot protect investors from systemic risk.
Systemic risk affects the entire market, making diversification ineffective.
What is inflation risk?
Inflation risk, sometimes called purchasing power risk, is the effect of continually rising prices on a fixed investment income.
This risk can erode the real value of returns from fixed income investments.
What is interest rate risk?
Interest rate risk is defined as a potential change in bond prices caused by a change in market interest rates.
If interest rates rise, existing bonds with lower coupons will decrease in value, while if rates fall, existing bonds with higher coupons will increase in value.
What happens to bond prices when interest rates rise?
Bond prices generally go down in value when interest rates rise.
This is because existing bonds with lower coupons become less attractive compared to new bonds issued at higher rates.
What is market risk?
Market risk is the risk that when the overall market declines, so will any portfolio made up of securities from that market.
This type of risk is inherent in all types of investments.
What are Class A (Front-End Load) Shares best for?
Investors with large investments and longer time frames
This allows the investor to lower the load cost overall and spread the one-time cost over several years.
How are sales charges handled with Class A shares?
Sales charges are paid at the time of purchase and taken from the total amount invested
Front-end loads are the most common way of paying for mutual fund shares.
