Investment Vehicles/Securities Flashcards
(354 cards)
1
Q
C
What are Cash & Cash Equivalents (CCE)?
A
Firm’s Assets that are Cash or can be immediately converted into Cash
2
Q
What’s an Insured Deposit?
A
Cash Deposits in a Financial Institution that are insured up to $250K by the FDIC
3
Q
What’s the FDIC?
A
Federal Deposit Insurance Corporation
4
Q
What are the 2 types of Insured Deposits?
A
Certificate of Deposit (CD)
Demand Deposit
5
Q
What’s a CD?
Certificate of Deposit
A
An Insured Time Deposit issued by a Bank that may or may not be a negotiable instrument
6
Q
What’s a Time Deposit?
A
Cash Deposits that can’t be withdrawn before an agreed upon Time Limit
7
Q
What’s a Negotiable CD?
Certificate of Deposit
A
A Money Market Instrument traded on the Secondary Market
Jumbo CD
8
Q
What are the 3 Characteristics of a Negotiable CD?
Certificate of Deposit
A
Min. $100,000 Denominations
Redeemed at Maturity (2 wks to 1 yr)
Typically traded by Institutional Investors
9
Q
What’s a Demand Deposit?
A
Funds held within a Financial Institution that a Client may immediately liquidate
10
Q
What are the 4 types of Demand Deposit Accounts?
A
Checking Account
Money Market Account
Negotiable Orders of Withdrawal (NOW) Accounts
Savings Account (one’s that aren’t Time Deposits)
11
Q
What’s a Money Market Instrument?
A
A Short-Term (1- yr) Investment-Grade Debt Security traded on the Secondary Market
12
Q
What are the 4 types of Money Market Instruments?
A
Banker’s Acceptances (BA’s)
Commercial Paper
Repurchase Agreements (Repos)
Treasury Bills (T-Bills)
13
Q
What’s a Banker’s Acceptance (BA)?
Bills of Exchange
A
A post-dated Domestic or International payment guaranteed by a Bank
14
Q
What’s Commercial Paper?
A
An Unsecured Discounted Promissory Note w/ a Maturity of 270- Days & is Exempt from SEC Registration
15
Q
What’s a Repurchase Agreement (Repo)?
A
A Short-Term (Max 48 hrs) Agreement to sell Gov. Securities in order to buy them back at an ▲ Price
16
Q
What’s a Reverse Repo?
Repurchase Agreement
A
A Short-Term (Max 48 hrs) Agreement to buy Gov. Securities in order to sell them back at an ▲ Price
17
Q
What’s a Treasury Bill (T-Bill)?
A
A Treasury Security w/ a Maturity of 1- yr
18
Q
What’s a Money Market Account (MMA)?
Money Market Deposit Account (MMDA)
A
An Interest bearing Checking or Savings Account offered by a Bank or Credit Union
19
Q
Which Account generally pays ▲ I/R?
Money Market Account (MMA)
Savings Account
A
Money Market Account (MMA)
20
Q
What’s a Money Market Fund?
A
A Mutual Fund that invests in Short-Term Debt Securities & CCE, SIPC Insured up to $500K
21
Q
What’s a Fixed Income Security?
A
A Debt Instrument Issued by a Gov. or Corporation
22
Q
What’s a Bond?
A
Fixed Income Security
Debt Instrument
Leverage Instrument
23
Q
What’s the Face/Par Value of a Bond?
Nominal, Original, or Dollar Value
A
The Value of the Bond as stated by its Issuer
24
Q
What are Investment-Grade Bonds?
A
Bonds Rated BBB- & Above
25
What's a Callable Bond?
| Redeemable
A Corporate Bond that the Issuer may Redeem before it reaches the stated Maturity Date
26
What's the Benefit of a Callable Bond?
Firms can call (payoff) the Bond early if Market I/R ▼ allowing the Firm to re-borrow at a ▼ I/R
27
What's a Redeemable Bond Catastrophe Clause?
A Bond Clause that allows an Issuer to Call Bonds before Maturity if certain specified events occur
28
What's a Redeemable Bond Call Protection Period?
The period of time in which a Bond can’t be Called
29
What's a Redeemable Bond Call Risk?
The Risk that a Bond may be called prior to Maturity
30
What's Callable Bond Refunding?
The process of Calling Bonds when I/R ▼
31
What's Redeemable Bond Reinvestment Risk?
The Risk that $$$ from a Called Bond can’t be Invested Favorably
32
What's a Redeemable Bond Sinking Fund?
Issuer Funds that are set aside in advance of a Call
33
What's a Discount Bond?
A Bond priced below Par Value
34
What's a Zero-Coupon Bond?
A type of Discount Bond that pays 0 Interest
35
What's a Coupon Bond?
| Bearer Bond
A Bond that pays Semi-Annual I/R & is issued as a Book Entry Security or Paper Certificate
36
How are Coupon Bonds Issued in the US?
In Book Entry (Electronic) Form
37
What's a Coupon Rate?
Nominal Yield
38
What's a Debenture?
A Bond w/ no Collateral
39
What's a type of Debenture?
Credit Card
40
What's a Bond Maturity?
The Future Date in which a Bondholder receives the Principal
41
What's a Bond Principal?
The value received when a Bond has Matured
42
What's an Investment Principal?
The original value invested/borrowed
43
What's a Bond Duration?
The measure of a Bond's Expected Volatility in a changing I/R environment
44
What's a Treasury Security?
An Exempt Debt Security issued by the U.S. Gov. & isn’t Callable
45
Where are Treasury Securities Purchased?
Treasury Direct or the Secondary Market via weekly/monthly Auctions of Competitive or Non-Competitive Bids
46
What's a Bid?
The Highest Price at which a BD will buy Shares
47
What's an Ask?
| Offer
The Lowest Price at which a BD will sell Shares
48
What's the Trading Spread Equation?
Bid - Ask
49
What's a Treasury Security Competitive Bid?
When Investors specify the Yield they want, at the Risk that their Bid may not be approved
50
What's a Treasury Security Non-Competitive Bid?
When Investors accept whatever Yield is determined at Auction
51
What are the 6 types of U.S. Treasury Securities?
Treasury Bills (T-Bills)
Treasury Notes (T-Notes)
Treasury Bonds (T-Bonds)
Treasury Inflation-Protected Securities (TIPS)
Separate Trading of Registered Interest & Principal of Securities (STRIPS)
Treasury Receipts (TR)
52
What's a Treasury Note?
A Treasury Security w/ a Maturity of 1-10 yrs
53
What's a Treasury Bond (T-Bond)?
A Treasury Security w/ a Maturity of 10-30 yrs
54
What are TIPS?
| Treasury Inflation-Protected Securities
A Treasury Security that protects Investors from Inflation & has a Maturity of 5, 10, or 30 Yrs
55
How do TIPS work?
| Treasury Inflation-Protected Securities
As Inflation ▲ the Principal & I/R Payments ▲
56
What's Phantom Income as it relates to TIPS?
When the IRS Taxes TIPS on the Principal & I/R Payment ▲ Annually even before Maturity is reached
57
What's a STRIP?
| Separate Trading of Registered Interest & Principal of Securities
A Treasury Security where the Coupon is sold separately from the Bond
| Stripped Bond or Z-Bond
58
What's a Treasury Receipt?
A Zero-Coupon Treasury Security issued by a BD
59
What are Gov. Agency Securities?
Securities offered by the U.S. Gov. that are Exempt from Registration under the 33’ Act
60
What's a Gov. Owned Organization?
A Gov. Organization that is backed by the full faith & credit of the U.S. Gov.
61
What's a Gov. Sponsored Enterprise (GSE)?
A Quasi-Gov. Organization that has a line of credit from the U.S. Treasury, but not full backing
62
What are the 4 types of U.S. Mortgage Agencies?
Federal Home Loan Bank System (FHLBank System)
Federal Home Loan Mortgage Corporation (FHLMC) (Freddie Mac)
Federal National Mortgage Association (FNMA) (Fannie Mae)
Government National Mortgage Association (GNMA) (Ginnie Mae)
63
What's the Federal Home Loan Bank System (FHLBank System)?
| FHLBank
A GSE that issues Loans to Participating Financial Institutions via Short-Term Bonds w/ Semi-Annual I/R & $10K+ Par Value
| Government Sponsored Enterprise
64
What's the Federal Home Loan Mortgage Corporation (FHLMC)
| Freddie Mac
A GSE that buys Conventional Residential Mortgages from Financial Institutions & sells them as Participation Certificates or Pass-Through Securities w/ Semi-Annual I/R & $25K+ Par Value
| Government Sponsored Enterprise
65
What's the Federal National Mortgage Association (FNMA)
| Fannie Mae
A GSE that buys Guaranteed, Insured, & Conventional Mortgages from Banks & sells them as Short-Term Discount Bonds w/ Semi-Annual I/R & $10K+ Par Value
| Government Sponsored Enterprise
66
What's the Government National Mortgage Association (GNMA)
| Ginnie Mae
A Gov. Owned Organization that buys Farmers Home Administration (FHA) & VA Insured Mortgages & sells them via Modified Mortgage-Backed Pass-Through Securities w/ Monthly I/R & $25K+ Par Value
67
What's the Student Loan Marketing Association (SLM)
| Sallie Mae
A GSE owned by Shareholders that issues Private Education Loans
68
What's a Book Entry Security?
A Security represented via Electronic Format & not a Physical Certificate
69
What's a Convertible Bond?
A Corporate Bond that can be Converted into Equity
70
What's the Bond Conversion Ratio Equation?
71
What's Bond Conversion Parity?
The point at which there is neither Profit or Loss in a Bond Conversion
72
What's a Corporate Bond?
A Bond issued by a Corporation that is typically BB+ Rated
73
How are Corporate Bonds Taxed?
The Bond Interest & Capital Gains are Taxed at every level (Federal, State, & Local Taxes)
74
What's a Municipal Bond?
A Bond issued by a Municipality that is typically A Rating
75
Are Municipal Bonds Tax-Free?
Yes, if you live in the Municipality. If you live outside the Municipality, but in the same State, then the Interest is Tax-Free. If you live Out-of-State, then everything is Taxed.
76
What's a General Obligation (GO) Bond?
A Municipal Bond backed by Full Faith & Credit of the Issuer
77
What does Full Faith & Credit in a GO Bond mean?
| General Obligation
The Bond is paid for by Municipal Income, Sales, & Ad Valorem (Property) Taxes
78
What's Double-Barrelled Debt in a GO Bond?
| General Obligation
GO Debt that's 1st backed by Revenue Collections, then Taxes
79
What's a Revenue Bond?
A Municipal Bond backed by Fees, Revenues, or Special Assessments collected from a Facility or Project
80
What's a Moral Obligation Bond?
A Revenue Bond where the State Legislative Authority has a moral (not Legal) obligation to appropriate $$$ to pay off the Bond
81
What's an Industrial Revenue Bond?
A Revenue Bond that is instead backed by Corporations to pay for a Facility or Project
82
Are Industrial Revenue Bonds Tax-Exempt?
No, they Incur Federal Taxes & Alternative Min. Tax (AMT) since they are backed by a Corporation
83
What's a Bond Indenture?
| Trusted Indenture
A list of Covenants or Rules between the Issuer & the Trustee (who acts on behalf of the Bondholders)
84
What's a Bond Indenture Rate Covenant?
The Issuer promises to provide competitive I/R
85
What's a Bond Indenture Closed/Open-End Covenant?
Determines the Liquidation Seniority of new Bonds
86
What's a Bond Indenture Maintenance Covenant?
The Issuer promises to maintain the Facility/Project so that Revenues continue to pay the Bondholder(s)
87
What's a Bond Indenture Catastrophe Covenant?
The Issuer collects on an Insurance Policy to pay Bondholders if a Catastrophe strikes the Facility/Project
88
What's a Bond Indenture Sinking Fund Covenant?
An Issuer Escrow Account that pays the Bond at Maturity or Calls the Bond early
89
What's a Bond Indenture Net Revenue Pledge?
Operation & Maintenance Exp. of the Facility/Project are paid 1st, then the Bond I/R Payments & Principal
90
What's a Bond Indenture Gross Revenue Pledge?
Bond I/R Payments & Principal are paid 1st, then the Operation & Maintenance Exp. of the Facility/Project
91
What's a Foreign Bond?
Bonds issued by Foreign Gov. or Firm
| Sovereign Debt
92
What's a Brady Bond?
A Bond issued in U.S. Dollars (USD) by 3rd World Nations that are collateralized by U.S. Treasury Zero-Coupon Bonds
93
What's a Bond Rating?
The Riskiness of a Bond measured by Standard & Poor (S&P) or Moody
94
What's a Municipal Bond Insurer?
An Insurance Firm that guarantees payment of a Municipal Bond Interest & Principal
95
Who are the 3 U.S. Municipal Bond Insurance Firms?
Assured Guaranty
Build America Mutual
National Public Finance Guarantee Corp.
96
What's the Current Yield Equation of a Bond?
| A Bond's ROI
97
What's a Bond's Yield-to-Maturity (YTM)?
The Yield of a Bond held to Maturity
98
What's the Bond YTM Equation?
99
What's a Bond's Yield-to-Call (YTC)?
The Yield of a Bond held to Call
100
Which Bond Yield is the highest for a Par Bond?
Current Yield, Nominal Yield, & YTM are the same
101
Which Bond Yield is the highest for a Discount Bond?
YTM, Current Yield, then Nominal Yield
102
If I/R ▲, what happens to Yields & Prices?
Yields ▲
Prices ▼
103
What's Anti-Dilution?
When the # of Shares & Stock or Strike Price are adjusted to counteract the effect of Convertible Bonds & Options
104
What are Authorized Shares?
The # of Shares Authorized to be Issued in a Corporate Charter
105
What are Issued Shares?
The # of Authorized Shares sold to Investors
106
What are Unissued Shares?
The # of Authorized Shares that haven’t been sold to Investors
107
What's Treasury Stock?
Issued Shares that have been repurchased by the Firm
108
What's the Outstanding Shares Equation?
Issued Shares - Treasury Stock
109
What's an Equity Security?
A Security that represents Ownership in a Firm
110
What's Common Stock?
| Junior Security
An Equity Security that grants Voting Rights, but has the lowest Liquidation Priority
111
What's a Blue Chip Firm/Stock?
A large, matured Firm w/ ▲ Brand Recognition & Loyalty
112
What's the Market Cap Equation?
| Capitalization
113
What are the 6 Shareholder Rights?
Inspect Firm Financial Statements
Claim to Firm Assets during Liquidation
Preemptive Right
Receive Dividends once Declared
Transfer Ownership
Vote through Proxy
114
What's a Shareholder Preemptive Right?
| Anti-Dilution Right
The Right to maintain the same % of Ownership in a Firm when New Shares are Issued by purchasing New Shares at a Subscription Price
115
What's a Stocks Subscription Price or Right?
A Short-Term Exercise Price that is less than the POP
| Public Offering Price (POP)
116
What's a Shareholder Right to Vote through Proxy?
Granting another Individual the Power of Attorney to Vote on your behalf
117
What are the 4 Voting Rights?
Decisions about changes in Firm Operations
Election of Board of Directors (BoD)
Issuance of Additional Securities
Stock Splits
118
What are the 2 Types of Voting Processes?
Cumulative Voting
Statutory Voting
119
What's Cumulative Voting?
Shareholders are permitted 1 Vote per Share per Vacancy & can distribute the Shares however they want between the Vacancies
120
What's Statutory Voting?
Shareholders are permitted 1 Vote per Share per Vacancy & must distribute the Shares evenly between the Vacancies
121
How do you calculate the Total Votes Permitted for Voting Rights?
122
What's Preferred Stock?
An Equity Security that grants Superior Shareholder Rights, specifically ▲ Liquidation Priority, but no Voting Rights
123
What's Adjustable Rate Preferred Stock?
| Floating Rate or Variable Rate Preferred Stock
Preferred Stock in which the Dividend is reset at specified Intervals
124
What's Convertible Preferred Stock?
Preferred Stock that can be Converted into Common Stock
125
What's an American Depositary Receipt (ADR)?
Certificates issued by U.S. Commercial Banks representing Ownership in Foreign Firm Shares
126
What's a Sponsored ADR?
| American Depositary Receipt
An ADR where the Issuer provides all SEC mandated Stock info, Dividends are paid in USD, & the Investor is granted Voting Rights
127
What's an Unsponsored ADR?
| American Depositary Receipt
An ADR where the Issuer doesn’t provide SEC mandated Stock info, the Stock is traded OTC, & the Investor isn’t granted Voting Rights
128
What's Restricted Stock?
| Unregistered or Letter Stock
Unregistered Shares of Ownership in a Firm acquired through an ESOP or through Private Placement (Reg D Offering)
129
What are the 2 types of Restricted Stock?
Restricted Stock Awards
Restricted Stock Units (RSU)
130
What's a Restricted Stock Award?
Restricted Stock that grants Employees immediate Shares upon meeting particular goals
131
What are Restricted Stock Units (RSU)
Restricted Stock that grants Employees Vested Shares or Cash upon meeting particular Goals
132
What's SEC Rule 144?
A form that must be filed before selling Restricted Stock & reported after the Transaction is made
133
What's an Investment Holding Period?
The Time an Investment is held by an Investor between the Trade Date of Purchase & Sale of a Security
134
What's the Holding Period for Restricted Stock?
6+ Months:
Before Selling
Before an RIA can solicit business
135
How much Restricted Stock can you sell at a time?
1% of Outstanding Shares
Avg. 4wk Trading Volume
136
What's an Employee Ownership Plan (EOP)?
A Qualified Defined Benefit Retirement Plan that provides Employees w/ Ownership of a Firm
137
What's a Qualified Defined Benefit Plan?
A Qualified Retirement Plan where an Employer guarantees a set mthly payment for Life or a lump sum payment at Retirement
| Federally Insured up to a Limit 🗸
138
What's an Employee Stock Option (ESO)?
An EOP that provides Employees the opportunity to buy Vested Shares at a Fixed Price for a Set Period
139
What are the 2 types of ESOs?
| Employee Stock Options
Incentive Stock Options (ISO)
Non-Qualified Stock Options (NSO)
140
What's an Incentive Stock Option (ISO)?
| Statutory or Qualified Stock Options
ESOs offered to Top Management & Key Employees that are Taxed when Sold & may incur Alternative Min. Tax (AMT)
| Employee Stock Option
141
What's a Non-Qualified Stock Option (NSO)?
| Non-Statutory Stock Option
An ESO offered to any Employee (incl. Board Members & Consultants) that are Taxed when the Options are Exercised
| Employee Stock Option
142
What's a Dividend?
The distribution of a Firm’s earnings to its Shareholders as determined by the BoD, but approved by Shareholders via Voting Rights
143
What are the 2 types of Dividends?
Ordinary Dividends
Qualified Dividends
144
What are Ordinary Dividends?
| Non-Qualified Dividends
Dividends Taxed as Ordinary Income
145
What's a Qualified Dividend?
Dividends reported to the IRS that are Taxed as a Capital Gain (▼ Rate) rather than Income
146
What format are Dividends Issued?
Cash
Stock Shares
147
What are the 4 Dividend Dates?
Declaration Date
Ex-Dividend Date
Record Date
Payment Date
148
What's a Dividend Declaration Date?
| Announcement Date
The Date in which a Firm’s Management Announces/Declares the distribution of a Dividend
149
What's an Ex-Dividend Date?
| Ex-Date
The date in which the Dividend eligibility expires
| Typically 1 Day before the Record Date
150
What's a Dividend Record Date?
| Cutoff Date
The Date in which Shareholders are eligible to receive a Dividend or Distribution
151
What's a Dividend Payment Date?
The Date in which the Firm distributes the Dividend payments
152
What's the required Holding Period to qualify for Common Stock Dividends?
You must have Owned the Stock for 60+ days before the Ex-Dividend Date
153
What's the required Holding Period to qualify for Preferred Stock Dividends?
You must have Owned the Stock for 90+ days before the Ex-Dividend Date
154
What's the required Holding Period to qualify for Mutual Fund Dividends?
You must have Owned the Stock for 60+ days before the Ex-Dividend Date
155
Does a Dividend Record Date come 1 day before or after the Ex-Dividend date for a Mutual Fund?
1 day before
| Unlike Common & Preferred Stock, in which it is after
156
What's Fundamental Analysis?
The measurement of the Value of a Firm
157
What's Technical Analysis?
The measurement of the changes in Prices & Timing of Investments
158
What's a Dividend Model?
The measurement of the Value of an Equity Position based on Present & Future Dividend Payments
159
What are the 2 types of Dividend Models?
Dividend Discount Model (DDM)
Dividend Growth Model (DGM)
160
What's the Dividend Discount Model (DDM)?
The Price of a Stock is worth the sum of all its future Dividend Payments when discounted back to their PV
161
What's the Dividend Growth Model (DGM)?
| Gordon Growth Model (GGM)
Applying a Growth Rate to the present Dividend to predict future Income
162
What's a Pooled Investment?
A Financial Instrument that pools Shareholder Assets together to invest in Securities
163
What are the 2 categories of Pooled Investment Funds?
Closed-End Fund
Open-End Fund
164
What's a Closed-End Fund?
A Pooled Investment Fund that Issues a limited # of Shares onetime via an IPO & trades on the Secondary Market
165
How is a Closed-End Fund Traded?
At Market Price, which is a Premium or Discount to NAV
| Net Asset Value
166
What's an Open-End Fund?
A Pooled Investment Fund that issues an unlimited # of Redeemable Shares
167
How is an Open-End Fund Traded?
Shares are Redeemable w/ the Issuer at NAV & Purchased at POP
| Net Asset Value & Public Offering Price
168
What's a Mutual Fund?
A Pooled Investment operated by Professional Money Managers that only Trades Once a Day after the Market Closes
169
What are the 9 types of Mutual Funds?
Balanced Funds
Bond Funds
Income Funds
Index Funds
International/Global Funds
Money Market Funds
Real Estate Mutual Funds
Specialty Funds
Stock Funds
170
What's a Balanced Fund?
| Asset Allocation Fund
A Mutual Fund that invests in a Hybrid of Asset Classes
171
What's a Bond Fund?
| Fixed-Income Mutual Fund
A Mutual Fund that invests in Securities that pay a set RoR
172
What's an Income Fund?
A Mutual Fund that provides Income to Investors on a steady basis
173
What's an Index Fund?
A Mutual Fund that invests in Stocks corresponding to a major market Index (e.g. S&P 500 or DJIA)
174
What's an International Fund
| Foreign Fund
A Mutual Fund that invests in Assets located outside an Investor’s home Country
175
What's a Global Fund?
A Mutual Fund that invests anywhere around the world
176
What's a Money Market Fund?
A Mutual Fund that invests in Short-Term Debt Securities & CCE, SIPC Insured up to $500K
177
What's a Real Estate Mutual Fund?
A Mutual Fund that invests in REITs & Real Estate Firms
178
What are the 3 types of Specialty Funds?
Regional Fund
Sector Fund
Socially-Responsible Fund
179
What's a Regional Fund?
A Mutual Fund that invests in a specific geographical area of the world
180
What's a Sector Fund?
A Mutual Fund that invests in specific Sectors of the Economy
181
What's a Socially-Responsible Fund?
| Ethical Funds
A Mutual Fund that invests in Firms that meet the Socially-Responsible Guidelines or Beliefs of the Fund
182
What's a Stock Fund?
| Equity Fund
A Mutual Fund that invests in Equity or Stocks
183
What are the 3 types of Stock Funds?
Blend Fund
Growth Fund
Value Fund
184
What's a Blend Fund?
A Mutual Fund that invests in a combination of Growth & Value Stocks
185
What's a Growth Fund?
A Mutual Fund that invests in Growth Stocks
186
What's a Value Fund?
A Mutual Fund that invests in Stocks that appear to be trading for less than their Instrinsic or Book Value
187
What's the Net Asset Value Equation of a Mutual Fund?
| Bid Price
Mutual Fund Assets - Liabilities
188
What's the NAVPS Equation of a Mutual Fund?
| Net Asset Value Per Share
189
What's the POP Equation of a Mutual Fund?
| Public Offering Price or Ask Price
NAV + SC
| Net Asset Value + Sales Charge
190
What's Mutual Fund Forward Pricing?
The fact that the Investor’s Bid or Ask Price for a Mutual Fund is calculated at the end of each Trading day (thus it can change)
191
What are the 4 types of Shareholder Fees charged by a Mutual Fund?
12b-1 Fees
Annual Fees
Commissions
Expense Ratios
192
What's a typical Mutual Fund Commission?
| Sales Charge or Load
8.5% of the POP & not an Expense
193
What's a Mutual Fund Commission Breakpoint?
| Bracket
The Commissions determined for each Investment Bracket (Amount)
194
What's a Mutual Fund Letter of Intent (LOI)?
When an Investor Qualifies for a ▲ Breakpoint by promising (non-binding) to Invest more $$$ within 13 mths
195
What's a Mutual Fund Contingent Deferred Sales Charge (CDSC)?
An ▲ Commission charged if Shares are Redeemed early
196
What's the Expense Ratio Equation for a Mutual Fund?
197
What are the 2 types of 12b-1 Mutual Fund Fees?
Management Fees
Ongoing Distribution Fees
198
How much can a 12b-1 Mutual Fund Fee charge?
0.75%- of Assets Annually & 0.25%- of Assets Annually if a No-Load Fund
199
What are the 4 Loads/Points of Sale for Mutual Fund Shareholder Fees?
Back-End Load
Front-End Load
Level-Load
No-Load
200
What's a Mutual Fund Back-End Load?
Shareholder Fees charged when an Investor Sells Shares
201
What's a Mutual Fund Front-End Load?
Shareholder Fees charged when an Investor Buys Shares
202
What's a Mutual Fund Level-Load?
Shareholder Fees charged Quarterly throughout the Investment Lifetime typically for Class C Shares
203
What's a Mutual Fund No-Load?
When Shares are originally provided to an Investor at NAV w/out a Commission
204
What's the Composition of a Mutual Funds BoD?
| Board of Directors
40% External Directors
60% Internal Employees, Underwriters, or IA’s
205
What are the 3 Responsibilities of a Mutual Fund BoD?
| Board of Directors
Appoint & Oversee IA’s, Transfer Agents, & Custodians
Establish Dividend & Capital Gains Policy
Establish Investment Policy
206
What are the 7 Shareholder Rights for a Mutual Fund?
Approving changes in Investment Objectives & Policies
Approving IA Agreements
Approving changes in Fees
Electing Directors
Ratifying Selection of Independent Auditors
Right of Accumulation
Voting Rights/Proxies
207
What's a Shareholder Right of Accumulation?
When an Investor Qualifies for a ▼ Fee since their Investment Amount reaches an ▲ Investment Breakpoint
| Family Members, Dependents, & Businesses Qualify
208
What's the Function of an IA for a Mutual Fund?
| Investment Advisor
To Manage the Fund
| The Management Fee is the Largest Operating Expense
209
What are the 3 Functions of a Custodian for a Mutual Fund?
Performs Payable & Receivable Functions for Securities Transactions
Registers the Receipt of Interest & Dividends for the Fund
Safeguards the Physical Assets of the Fund
210
What are the 4 Functions of a Transfer Agent for a Mutual Fund?
Customer Name & Address Changes
Deliverance & Redemption of Shares
Disbursement of Dividends & Capital Gains
Investor Mailings
211
What's the Function of an Underwriter for a Mutual Fund?
| Sponsor, Distributor, or Wholesaler
To Purchase a Funds Shares at NAV & Sell them to a Dealer or directly to Investors
212
What are Class A Mutual Fund Shares?
Large, Long-Term Investments w/ Front-End Load
213
What are Class B Mutual Fund Shares?
Small, Long-Term Investments w/ Back-End Load & ▲ Expense Ratio
214
What are Class C Mutual Fund Shares?
Small or Large, Short-Term Investments w/ Level-Load & ▲ Expense Ratio
215
How many Days does a Mutual Fund have to deliver $$$ to an Investor who Sells Shares?
7 Calendar Days
216
How often is a Mutual Fund NAVPS calculated?
| Net Asset Value per Share
Once per Day at 4PM EST
217
What's Dollar-Cost Averaging?
| Costant Dollar Plan
Systematically investing equal amounts of $$$ in a Security at regular intervals regardless of Stock Price
218
What are the 3 Benefits of Dollar-Cost Averaging?
May ▼ Avg. Cost/Share
May ▼ Portfolio Volatility
▼ Reliance on Market Timing of Lump-Sum Investments
219
What's IRS Regulation M?
| Subchapter M (Title 26 §851)
Allows Regulated Investment Firms to pass Taxes from Capital Gains, Dividend, & Interest Distributions to Investors if 90%+ of that Income is Distributed
220
What's the Net Investment Income Equation of a Mutual Fund?
221
What Income is Taxed to a Mutual Fund Firm if less than 90% of the Net Investment Income is Distributed to the Investors?
100% of the Income is Taxed to the Mutual Fund
222
What Income is Taxed to a Mutual Fund Firm if more than 90% of the Net Investment Income is Distributed to the Investors?
Only the remaining Undistributed Net Investment income is Taxed to the Mutual Fund. So 10% or less.
223
What's a Unit Investment Trust (UIT)?
A Registered Investment Company (RIC) or Trust that offers Fixed Portfolios (of Stocks & Bonds) as Redeemable Units to Investors for a specific period of time
224
What's a Regulated Investment Corporation (RIC)?
A Corporation where Investors are Joint Owners
225
What happens to the Redeemable Units of a UIT?
| Unit Investment Trust
The Units are Sold back to the UIT
| Unit Investment Trust
226
What are the 3 Benefits of a UIT?
| Unit Investment Trust
Investors can Redeem Units at anytime
No Management Fees 🗸 The Portfolio is typically Supervised, not Managed
Pass-Through Taxes 🗸
227
What 2 SEC Regulations apply specifically to UITs?
| Unit Investment Trust
Security Substitutions can only be made w/ written notice to the SEC & Investors must be notified within 5 Days
SEC can Liquidate the UIT at Anytime; If the UIT is Ineffective or it’s in the Best Interest of the Investors
228
What's an Exchange Traded Fund (ETF)?
A Pooled Investment that can be Traded throughout the Day
229
What are the 3 Benefits of an ETF?
| Exchange Traded Fund
▼ Broker Commissions Compared to Individual Stock Purchases
▼ Expense Ratios
▲ Liquidity Compared to Mutual Funds
230
What's an Inverse ETF?
| Exchange Traded Fund
ETFs that attempt to earn Gains by Shorting Stocks
231
What's a Leveraged ETF?
| Exchange Traded Fund
ETFs that utilize Derivative Securities to achieve Earnings
232
What's a Real Estate Investment Trust (REIT)?
A Pooled Investment Trust in a Firm that owns, operates, or finances income-generating Real Estate
233
What are the 3 Classifications of REITS?
| Real Estate Investment Trust
Public
Non-Public
Private
234
What's a Public REIT?
| Real Estate Investment Trust
Publicly Traded REITs registered w/ the SEC
235
What's a Non-Public REIT?
| Real Estate Investment Trust
Privately Traded REITs registered w/ the SEC
236
What's a Private REIT?
| Real Estate Investment Trust
Privately Traded REITs not registered w/ the SEC & typically only sold to Institutional Investors
237
How does a Trust Qualify as a REIT? (7 Qualifications)
Must be an Entity that’s Taxable as a Corporation
Must be managed by a Board of Directors or Trustees
Have 100+ Shareholders after the 1st Year of Existence
Have no more than 50% of Shares held by 5- Individuals
Invest 75%+ of Total Assets in Real Estate, Cash, or U.S. Treasuries
Derive 75%+ of Gross Income from Rent, Interest on Mortgages that Finance Real Property, or Real Estate Sales
Pay 90%+ of Taxable Income through Shareholder Dividends annually
238
What are the 3 Types of REITS?
| Real Estate Investment Trust
Equity REIT
Mortgage REIT
Hybrid REIT
239
What's an Equity REIT?
| Real Estate Investment Trust
A REIT that owns & manages income-generating Real Estate typically through Rents
240
What's a Mortgage REIT?
| Real Estate Investment Trust
A REIT that lends $$$ to Real Estate Owners & Operators directly or indirectly
241
What's a Hybrid REIT?
| Real Estate Investment Trust
REITs that're a combination of an Equity & Mortgage REIT
242
What's a Derivative Security?
A Contract between 2+ Parties that can Trade on an Exchange or Over-the-Counter (OTC) whose value is dependent on an underlying Asset(s) or Benchmark
243
Why are Derivative Securities utilized?
Hedging — To mitigate Risk
Speculation — Assuming Risk w/ the expectation of Reward
244
What are the 5 types of Derivative Securities?
Forwards
Futures
Options
Swaps
Warrants
245
What's an Option?
A Derivative Contract to buy or sell Stocks at a Preset Price (Strike Price) prior to or on the Expiration Date
246
Define an Option Buyer.
A Person w/ the Right, but not the Obligation to buy or sell a Security at the Strike Price
247
Define an Option Seller.
| Writer
A Person w/ the Obligation to Transact their side of the Trade if a Buyer decides to Execute the Option
248
What are the 2 types of Options?
Call
Put
249
What's a Call Option?
Buying an Option from a Seller at a Premium as a Leveraged Bet on the Appreciation of a Security
250
What's a Put Option?
Buying an Option from a Seller at a Premium as a Leveraged Bet on the Depreciation of a Security
251
What's Hedging?
A Short-Term Strategy employed to take an offsetting position in an Asset or Investment that ▼ the Price Risk of an existing position
252
What's an Options Straddle Strategy?
Buying or Selling a Call & a Put on the same Security w/ the same Strike Price & Expiration Date
253
What's an Options Horizontal Spread Strategy?
| Time or Calendar Spread
Buying or Selling 2 Calls or 2 Puts on the same Security w/ different Strike Prices, but the same Expiration Date
254
What's an Options Vertical Spread Strategy?
| Price Spread
Buying or Selling 2 Calls or 2 Puts on the same Security w/ the same Strike Price, but different Expiration Dates
255
What's a Futures Contract?
A Derivative Standardized Contract to buy or sell an Asset (that isn’t Stock) at a Preset Price (Strike Price) prior to or on the Expiration Date
256
What’s a Forward Contract?
A Derivative OTC Contract to buy or sell an Asset (that isn’t Stock) at a Preset Price (Strike Price) prior to or on the Expiration Date
257
What's a Warrant?
A Derivative OTC Contract between a Firm & an Investor to buy or sell the Firm's Asset(s) at a Preset Price (Strike Price) prior to or on the Expiration Date
258
What are the 5 types of Warrants?
Traditional
Covered
Detachable
Naked
Wedded
259
What's a Traditional Warrant?
| Warrant-Linked Security
Warrants issued in conjunction w/ New Shares of Bonds or Preferred Stock
260
What's a Covered Warrant?
Warrants issued by a Financial Institution that already own existing Shares
261
What are Detachable Warrants?
Warrants that can be separated from the Bond & sold on Secondary Markets before Expiration
262
What's a Naked Warrant?
A Warrant issued w/out accompanying Bonds or Preferred Stock
263
What’s a Structured Product?
An Alternative Investment (typically unsecured Debt) w/ payoffs linked to a variety of Assets
264
What's a Hedge Fund?
The General Partner of a Limited Partnership (LP) that deploys Leveraging & Trading of Non-Traditional Assets to earn above-average Investment Returns
265
What's a Blank Check Firm?
A developing Firm that has no specific Business Plan
266
What's a Special Purpose Acquisition Company (SPAC)?
A Blank Check Firm that generates Funds (via IPOs) to Finance Mergers & Acquisitions (M&A)
267
What's an Exchange Traded Note (ETN)?
A Bond that tracks an underlying Index of Securities, pays the Return of the Index it tracks at Maturity (less Fees) & doesn’t pay Interest
268
What are the 2 Limitations of ETNs?
| Exchange Traded Note
Earnings are only realized if the Index Return (-Fees) is Positive
▲ Default/Credit Risk since they are backed by the Credit of the Issuing Bank
269
What's a Reverse Convertible?
A Short-Term, High-Yield Bond that's associated w/ the performance of a Stock
270
What's an Annuity?
A Hedged Insurance Contract that provides Fixed, Indexed, or Variable Income Immediately or Deferred for the Life of a Client
271
Who's an Annuitant within an Annuity?
The Client
272
What's a Fixed Annuity?
An Annuity that provides Guaranteed Fixed Periodic I/R Payments to a Client Funded by a General Account w/ Tax-Deferred Earnings
273
Are Fixed Annuities an Exempt Security?
No, they aren't a Security at all
274
What's an Indexed Annuity
An Annuity that provides Periodic Payments to a Client based on a Fixed or Indexed RoR Funded by a General Account & Tax-Deferred Earnings
275
What's a General Account for an Insurance Product?
A Firm’s Primary Investment Account that the Firm holds all of the Investment Risk in
276
How are General Accounts for Insurance Products Regulated?
They require only a State Insurance License to sell & don't need to accompany a Prospectus
277
What's a Variable Annuity?
An Annuity that provides Variable Periodic I/R Payments to a Client Funded by a Separated Account w/ Tax-Deferred Earnings
278
Are Annuity Earnings Guaranteed?
No
279
What's a Separated Account for an Insurance Product?
A Pooled Investment Account that a Client holds all of the Investment Risk in
280
How are Separated Accounts for Insurance Products Regulated?
They require a State Insurance License & Securities License to sell, along w/ a Prospectus
281
How do Fixed & Variable Annuities react to Inflation?
Fixed Annuities are Vulnerable to Inflation
Variable Annuities are Resistant to Inflation
282
What Expenses does the Pooled Investment Account within a Variable Annuity charge?
All of the same Shareholder Fees as a Mutual Fund & More:
Expense Risk Fee
Mortality Risk Fee
Premium Taxes
283
What are Accumulation Units for a Variable Annuity?
The # of Units of Interest a Client has in the Pooled Investment Account
284
What's an Immediate Annuity?
An Annuity that begins Immediately (1 period) after a Lump-Sum Deposit from the Client
285
What's a Deferred Annuity?
An Annuity where the Client specifies an Age at which they’ll begin receiving disbursements
286
How is a Deferred Annuity Taxed?
Deferred Gains are Taxed as Ordinary Income using LIFO
287
What's an Annuity Settlement Option?
How an Annuity pays the Client, which is determined at the beginning of the Payout Period & can’t be changed
288
What are the 4 types of Annuity Settlement Options?
Fixed Period Life Annuity
Joint & Last Survivor Life Annuity
Straight-Life Annuity
Unit Refund Life Annuity
289
What's a Fixed Period Life Annuity?
An Annuity w/ Periodic Payments for a specified # of Years (typically 10-15) where a Beneficiary can be named & payments continue after the Clients death
290
What's a Joint & Last Survivor Life Annuity?
An Annuity that pays 2 Individuals periodically & ends when both Individuals die
291
What's a Straight-Life Annuity?
An Annuity w/ the Highest Periodic Payment, but a Beneficiary can’t be named
292
What's a Unit Refund Life Annuity?
An Annuity w/ Periodic Payments, where a Beneficiary can be named & payments continue after the Clients death
293
What are the 2 Phases of Annuities?
Accumulation Phase
Annuitization Phase
294
What's the Annuity Accumulation Phase?
When an Annuity is being Funded
295
What's the Annuity Annuitization Phase?
When Annuity Payments commence
296
What are the 5 Contractual Guarantees in an Annuity?
1035 Exchange
Death Benefit
Expense Guarantee
Mortality Guarantee
Surrender Value
297
What's a 1035 Exchange for an Annuity?
Allows a Client to Rollover the Value of an Insurance Product (- Surrender Charges) to Another
298
What are Qualifying Rollovers in a 1035 Exchange for an Annuity?
Annuity to Annuity
Endowment Contract to Annuity
Life Insurance Contract to Life Insurance Contract
Life Insurance Contract to Annuity
299
What's a Death Benefit in an Annuity?
A Guarantee that if the Client dies during the Accumulation Phase the Accumulation Units will be paid to a Beneficiary
300
What's an Exchange Guarantee in an Annuity?
A Guarantee of the Max the Contract can charge for an Operating Expense Risk Fee
301
What's a Mortality Guarantee in an Annuity?
A Guarantee of Payments for the Life of the Client at the expense of a Mortality Risk Fee
302
What's a Surrender Guarantee in an Annuity?
A Guarantee that the Annuity can be Terminated during the Accumulation Phase for its Surrender Value
303
What's Life Insurance?
A Contract where a Policyholder pays Premiums to an Insurer to guarantee a Death Benefit for a Beneficiary(s)
304
What are the 2 types of Life Insurance?
Permanent Life Insurance
Term Life Insurance
305
What's Permanent Life Insurance?
Life Insurance Policies that remain Active until the Policyholder dies, stops paying Premiums, or surrenders the policy
306
What's Term Life Insurance?
Life Insurance Policies that remain Active for a set period of time that don’t accumulate a Cash Value
307
What are the 3 types of Term Life Insurance?
Convertible Term Life Insurance
Decreasing Term Life Insurance
Renewable Term Life Insurance
308
What's Convertible Term Life Insurance?
Term Life Insurance that can be converted into a Permanent Life Insurance Policy
309
What's Decreasing Term Life Insurance?
Renewable Term Life Insurance w/ coverage decreasing over the Life of the Policy at a predetermined rate
310
What's Renewable Term Life Insurance?
Term Life Insurance that provides a Quote for the Year the Policy is purchased and can be Renewed annually
311
What are the 2 types of Permanent Life Insurance?
Variable Life Insurance
Whole Life Insurance
312
What's Variable Life Insurance?
Permanent Life Insurance that accumulates a Cash Value to last the Lifetime of the Policyholder within a Separated Account
313
What's Whole Life Insurance?
| Cash-Value Life Insurance
Permanent Life Insurance that accumulates a Cash Value to last the Lifetime of the Policyholder within a General Account
314
What's UL Insurance?
| Universal Life
A combination of Renewable Term Life Insurance & Whole Life Insurance
315
What are the 2 types of UL Insurance?
| Universal Life
Indexed UL insurance
Variable UL Insurance
316
What are the 2 Benefits of a UL Insurance Policy?
| Universal Life
Flexible Premiums Adjusted over Time
▲ Death Benefit
317
What Life Insurance is the most Expensive for Young Policyholders?
Permanent Life Insurance
318
What Life Insurance is the most Expensive for Older Policyholders?
Permanent & Term Life Insurance are roughly the same price once you get Older
319
What's a Life Settlement?
When an Individual sells their Life Insurance Policy at a Discount from its Face Value for Cash
320
What's a Viatical Life Settlement?
A Life Settlement, but for Terminally or Chronically Ill Individual Policyholders w/ 2- Years to live
321
What are the 4 types of Persons involved in a Viatical Life Settlement?
Seller (Viator)
Provider — Any Person, other than a Viator, that enters into a Viatical Life Settlement Contract
Producer — The Firm that represents the Provider
Broker — The Firm that represents the Viator
322
What does the Seller of a Life Settlement Receive & Relinquish?
They receive Cash for the Life Insurance Policy they are Selling
They Relinquish the entire Death Benefit & the Obligation to pay the remaining Premiums
323
What does the Buyer of a Life Settlement Receive & Pay?
They receive the entire Death Benefit of the Life Insurance Policy
They must pay the Sale Price + all Future Premiums
324
What are the Risks of a Life Settlement?
Legal Challenge — The Settlement may be challenged by the Insurance Company
Liquidity Risk — Each Contract is Unique, which means illiquid
Mortality Risk — The Death of the Seller can be difficult to predict
325
What are Commodities?
Raw Materials that are used for Living, Trading, & Storing
326
What are the 3 Classes of Commodities?
Agricultural Goods
Energy
Metals
327
What are Precious Metals?
Rare Metals that have an ▲ Economic Value
328
What are the 8 Precious Metals?
Gold (#1)
Iridium
Osmium
Palladium
Platinum (#3)
Rhodium
Ruthenium
Silver (#2)
329
What's a Digital Asset?
Any Asset that exists entirely in a Digital Form that you can acquire the Right to use
330
What are the 3 types of Digital Assets?
Cryptocurrency
Non-Fungible Token (NFT)
Stablecoin
331
What's Cryptocurrency?
A Digital Currency that uses Cryptography to secure its Transactions
332
How does Cryptocurrency utilize Cryptography?
It uses a sophisticated Encryption Technique to Anonymously Store & Share Info on a Decentralized Network
333
What's a Non-Fungible Token (NFT)?
A Unique Digital Certificate created by Blockchain Technology that represents Ownership in a Digital Collectible
334
What does Non-Fungible mean for an NFT?
An Item that can’t be Traded, Replaced, or Exchanged for one another
335
What's a Stablecoin?
A Digital Currency that matches the Value of a Non-Digital Currency or Commodity
336
What are the Risks of Digital Assets?
▲ Cybersecurity Threat
▲ Fraud
▼ Liquidity
▲ Volatility
337
What's an Investment Order?
The Execution & Actual Purchase/Sale of a Security
338
What are Day Orders?
The Default Order type in which Orders are placed during a Day & can be Executed
339
What happens if an Order is placed during a Day, but isn't Executed?
It's Automatically Cancelled
340
What's a Good Till Canceled (GTC) Order?
An Order that will be Executed at a specific time or earliest convenience, unless it is Cancelled
341
What's a Not-Held Order?
Orders that grant a Floor Broker the ability to fill the Order at any time during the Day that they think is best
342
What are the 4 types of Orders?
Market Order
Limit Order
Stop Order
Stop Limit Order
343
What's a Market Order?
A live Order to immediately execute a purchase/sale of a Security
344
What's a Limit Order?
A live Order to buy/sell a Security at a given Price or beyond
345
What's a Stop Order?
A suspended Order that becomes a live Order when a Security reaches a Target Price, and then executes a purchase/sale of a Security at the Current Market Price
346
What's a Stop Limit Order?
A suspended Order that becomes a live Order when a Security reaches a Target Price, and then purchases/sells the Security at a specific Price
347
What's a Short-Sale?
| Shorting or Selling Short
Borrowing $$$ within a Margin Account to Sell a Security that the Investor doesn’t own but is committed to Repurchasing
348
What Order Type is used to limit losses on a Short-Sale?
Buy Stop
349
Which 3 Order types are place Above the Current Market Price?
Buy Stop
Buy Stop Limit
Sell Limit
350
Which 3 Order types are place Below the Current Market Price?
Buy Limit
Sell Stop
Sell Stop Limit
351
What happens to a Stock Price when a Dividend is Paid?
It's ▼ by the amount of the Dividend on the Ex-Dividend Date
352
Which 3 Order Types are Adjusted for a Dividend Payment?
Buy Limit
Sell Stop
Sell Stop Limit
353
What's the Total Return Equation?
354
What's the RoR Equation?
