Progress 2 Flashcards
What are ENTs backed by?
credit of financial institution
Best hedge for a long stock position
buy a put, stock will be sold at strike price if market dips
Main difference between open-end and closed-end investment companies
open-ended companies determine share price once a day (NAV)
closed-ended price fluctuates over the day due to market supply and demand
What do you multiply coupon rate by to find out how much annual interest is?
par value
M=1000
Where is information about a mutual fund’s expense ratio found?
front of the prospectus
What is the latest you can be entitled to a dividend when purchasing?
if the transaction is on the business day before the ex-dividend date
What is the largest index?
Wilshire 5000 Index
To be entitled to a dividend on common stock, what date must the person’s name be on the corporate books?
record date (same as ex dividend)
What securities have risk-free rate of return?
T-bills, (treasury securities)
What is the cost basis of inherited shares?
market value on date of the original owner’s death
Sales Charge Formula
(POP-NAV)/POP
Why would an investor choose a sector fund? (specialized fund)
high growth potential
What is a breakpoint sale?
when mutual fund shares are sold just below level which investor would receive reduced sales charge, boosting agent commissions
What is ‘switching’ in terms of mutual funds?
when a customer uses proceeds from the sale of shares of one mutual funds to purchase shares of another one
RR would do this to change objectives or if fund is underperforming
**not taxable
**benefits to RR should not outweigh benefits to customer
How much money can be taken from a 529 plan annually to pay for K-12 tuition?
$10k annually
What is a key feature of 529A accounts?
Tax-free growth on qualified withdrawals (basic living expenses, education, housing, wellness, etc. for disabled persons)
What is an equity-indexed annuity?
-not considered a security by the SEC
What is an LGIP?
Local government investment pool
-allows for investment by state, county, and city, not open to the public
-liquid investment that provides safety of principal
What are DPPs? Provide examples
-pass through income and posses to owners, not taxable entities
General Partnership
Limited Liability Company (LLC)
Subchapter S corp
(Subchapter C corps are owned by shareholders and are taxable, not DPPs)
When is price of a variable annuity calculated?
value of accumulation units is done at the end of each business day
What is an ETN?
Exchange-traded Note
unsecured debt securities issued by financial institutions
subject to credit risk of issuer
linked to any asset
no interest payments, pay a return based on benchmark asset performance
What is a benefit of DPPs?
offer the ability to offset passive income with passive losses
-investors do not participate directly in business activities
-use to offset passive income
