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Study Flashcards

1
Q

Us government issues underwritten via

A

Competitive bid

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2
Q

Us agency securities are underwritten via

A

Negotiated offering

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3
Q

MSRB rules. The following records must be kept for specified time periods

A

Trade comparisons
Customer account statements
Customer complaints

Not official statements.. accessed in EMMA

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4
Q

Coincident economic indicator

A

Person income
Index of industrial production
Employment levels

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5
Q

Leading economic indicator:

A

M2
Unemployment
Stock prices
Durable goods orders

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6
Q

Lagging economic indicator: past

A

Corporate profits,
Consumer credit to income levels
Employment duration

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7
Q

CMOS quoted

A

Yield spread, like government bonds

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8
Q

RANs

A

Unfounded

Source of temporary financing

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9
Q

Funded debt=

A

Long term corporate bond issues

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10
Q

Bond buyer revdex

A

25.revenue bonds with 30 years to maturity, rated A or better

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11
Q

Variable rate notes

A

Also know as reset notes
Rate of interest that is reset periodically, usually weekly based upon a recognized interest rate index that usually consists of treasury issues

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12
Q

Adjustment bonds

A

Corporate bonds that are used in reorganization’s with interest payable only if the corporation hits a specified earnings target

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13
Q

VC funds

A

Venture capital fund

  • a private placement limited partnership open to ONLY wealthy investors that makes private equity investments in privately held start up companies
  • only available to wealthy accredited investors
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14
Q

BDCs

A

Business development company

  • a registered investment company that makes private equity investments in start up companies.
  • listed and trade in an exchange
  • available to the general public
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15
Q

Tax swap

A

Sell muni bond in which he has a capital loss and immediately reinvest the proceeds in another muni bond.

  • gives investor a tax deductible capital loss
  • muni purchase MUST be different that the one he sold at a loss, or it will be considered a wash sale

Maturity
Coupon rate
Issuer

2 of the 3 need to be different

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16
Q

Broadest measure if the market

A

Wiltshire index

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17
Q

Mutual funds must send their financial statements to shareholders

A

Semi annually

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18
Q

CDO

A

Collateralized debt obligation

  • structured product that invests in CMO tranches.
  • rated based in the credit quality of the underlying mortgages
  • have underlying mortgage collateral that is backed by the credit huskily if those mortgages
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19
Q

Flow of funds as revenues are collected where do they go first?

A

Revenue fund… and then applied in sequence

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20
Q

Mutual funds

A

Impose a front end sales load
8 1/2% max fee allowed by FINRA

Contingent deferred sales charge
-imposed when the customer redeems tbe fund, fee is lower because fund is held longer encouring investors to keep money in the fund over the long term

No load= money market funds

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21
Q

Corporate bonds are quoted

A

Term bonds and are quoted on a percentage of par basis in 1/8ths with us the same as a “dollar” quote

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22
Q

Term bonds quoted

A

Percentage of par

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23
Q

Non contributory defined benefit retirement plan

A

Contribution amounts vary
Annual benefit payments are fixed

Larger contributions are made for older plan participants nearing retirement than for younger plan participants who have many years left until retirement

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24
Q

Defined contribution defined benefit

A

Contribution amount fixed.

The benefit depends on the investment results on the fixed contributions made and can vary

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25
Q

If market price and strike price at the same at expirations

What positions will result in a loss

A

Long call
Long straddle

“At the money” contracts will expire unexercised, and holder loses the premium, while writer gains the premium

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26
Q

ETNs

A

Structured product offered by banks that gives a return tied to a benchmark index.

Listed in a exchange and trade

Not an equity security.. debt security

Backed by faith and credit of issuing bank

In interest or dividend payments

Value grows as they are held based in the growth of the benchmark index with any gain at sale or redemption currently taxed at capital gains rates
=tax advantages as compared to conventional debt instruments

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27
Q

Broker dealers must send what semi annually to its customers?

A

Balance sheet
Subordinated loan amounts
Net capital computation

Do not need inventory amounts

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28
Q

Regulation M

tier 1, Tier 2, Tier 3

A 
Tier 1
Daily trading volume of $1,000,000
Market float rate of $150,000,000
No restriction for trading prior to distribution
Issue is too big for price manipulation

Tier 2
$100,000
$25,000,000
Restricted period is the business day prior to the effective date

Tier 3
Any other security not meeting these minimums is a tier 3 restricted period of 5 business days prior to the effective date

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29
Q

Deflation

A

Over a period of 18 months, prices of good and services decrease by 2% and market interest rates decrease by 3%

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30
Q

Call covenants that MUST be considered when computing the dollar price of a muni bond quoted on a yield basis

A

In whole call ONLY

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31
Q

What agencies may issue securities

A

FHLMC (federal home loan mortgage Corp)
FHLB(federal home loan bank)
TVA (Tennessee valley authority)

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32
Q

Highest investment grade rating

A

AAA

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33
Q

Lowest investment grade rating

A

BBB

34
Q

Rule 144A

A

A QIB is an institutional investor with at least $100,000,000 of assets available for investment.
Individuals no matter how wealth are NOT QIBs!
*Permits the issuers to sell minimum $500,000 blocks of private placement securities to QIBs without SEC registration

Traded from QIB-QIB through PORTAL-only for 144A issues

(Qualified institutional buyer)

35
Q

OATS=

A

Order audit trail system

  • records of orders are require for all us equities markets. NYSE, AMEX, NASDAQ, OTCBB, OTC

NOT for CBOE… options.

36
Q

Regulation SHO

A

Mandatory buy in provision

Require and up tick or up bid is rescinded

Prohibits naked short selling and requires exchanges to maintain a threshold list of hard to barrow securities.
If a threshold list security is sold short and the security is not delivered in settlement the rule requires that the security be bought in after 13 consecutive settlement days have elapsed from trade date

37
Q

Difference between open end management company and closed ended management company

A

Capitalization

Open end funds continuously issue and redeem shares

Closed end funds have a one time stock issuance and the fund is closed to new investments

38
Q

Stock power

A

Legal transfer document

39
Q

Defense interval ratio measured:

A

Liquidity

40
Q

Market risk

A

Risk of rising interest rates forcing the price of the bond to drop.

Longer maturities drop the fastest

41
Q

Recourse

A

Added to basis since the partner is personally at risk for this

42
Q

ETF

A

Exchange traded funds

Trade like any other stock

Bought and sold at the prevailing market price plus commission

Can be bought in margin and can be sold short

43
Q

Accounts receivable turnover ratio

A

Annual net sales\year end accounts receivable

44
Q

Primary purchasers of treasury securities

A

Investment companies
Broker dealers
Commercial banks

*not federal reserve banks

45
Q

Fed funds rate

A

Average rate of member banks throughout the United States

Daily rate charged by member banks for overnight loans of reserves

46
Q

Dividend payout ratio

A

Common dividends/earnings for common

First must deduct the preferred dividend from the net income for the earnings for common.

47
Q

An offer of IPO shares made to an officer of a publicly held company:
“Spinning”

A

Prohibited if the purpose of the offer is to get investment banks business from that company

48
Q

Accretion of bond discount

A

Increases reported interest income each year

Increases the bonds cost basis each year

49
Q

Insiders:

A

Cannot sell their stock short (except to short against the box at year end to lock in a gain)
Forfeit any short swing profits (profit made in less than 6 months of holding the shares)

Reported within 2 business days of the trade to the SEC

50
Q

High put\call ratio=

A

Oversold market
Market is ready to move higher

More puts than calls

51
Q

Low put\call ratio

A

Overbought market
Market is ready to move lower
More calls than ours

52
Q

Churning:

A

Excessive trading in a customers account.

RR has to have a reasonable basis for believing that a series of recommended transactions, even if suitable when viewed in isolation are not excessive and unsuitable for the customer when take together

Quantitative suitability

53
Q

What is not defined as a security?

A

Fixed annuity

*element of risk not included

54
Q

Non qualified deferred compensation plans

A

Employees have limited claim to plan benefits if the business fails

Benefits payable to employees at retirement are taxable

Board members are not elegy me for these plans, as they are not considered employees

No IRS approval

May be discriminatory and offered only to certain employees such as key executives.

55
Q

Selling a mutual fund shares immediately below the dollar amount stated in the prospectus that would qualify an investor to receive a reduced sales charge is called

A

Breakpoint sale

56
Q

Variable rate municipal bonds investments main advantage is?

A

*It’s price should remain relatively stable

No fixed coupon rate

Coupon is tired to a market rate

As interest rates rise the coupon is adjusted upward, as rates fall, the coupon is adjusted downward (same direction)

57
Q

ADRs (American depositary receipts)

A

issued by large domestic commercial banks

facilitate U.S. trading/investors who want to trade in foreign securities

58
Q

Gonna Mae
Freddie Mac
Fannie Mae

A

Mortgage

59
Q

FCS (farm credit system)

A

National network of lending institutions that provides agricultural financing and credit.

Issues discount notes, floating rate bonds, and fixed rate bonds,

Maturity: 1-30 years

Not pass through investments

Issue short term notes and long term bonds

Proceeds are used to make loans to farmers

Interest is tax exempt at the state and local level
Federal tax

Indirect obligations of the US gov. Not directly backed

60
Q

Index option cash settlement occurs

A

Next business day after option is exercised

61
Q

Unrealized appreciation

Realized appreciation

A

???

62
Q

What securities are typically sold with a legal opinion attached?

A

Municipal bonds

63
Q

Legal opinion

A

Supplied by bond counsel

States that the municipal bond is legal and binding on the issuer, if tax exempt that opinion is stated as well

Exclusive to municipal securities

64
Q

Tran
Tan
Ban

A

Short term funding used by municipalities.

65
Q

What action would cause the SMA to increase

A

The market value of SHORT securities decreasing

*not long decreasing

66
Q

Net revenue pledge. What is the first item that gets paid from the revenue received?

A

Operations and maintenance fund

67
Q

Advantage of an oil and gas INCOME program, compared to other types of oil and gas programs

A

Lowest risk of capital

Income
Exploratory
??

68
Q

Covered call

A

…

Long shares, long call

69
Q

Covered put

A

Short shares, long put guess

70
Q

Income strategies

A

??

71
Q

Hedging strategies

A

??

72
Q

stable market for options

A

Short spread

73
Q

Volatile market for options

A

??

Long spread

74
Q

What does DRP stand for

A

Disclosure reporting page

75
Q

Primary distribution

A

When an existing, publicly traded corporation issued a large block of NEW shares to expand.

Not an IPO because it’s not the first time, but still a primary distinctions becuase they are new shares

76
Q

IPO restricted persons

A

Spouses, parents, children, siblings and in laws, a person supported by the employee

Aunts, uncles, grandparents are excluded

77
Q

Zero coupon bonds

A

Purchased at discount mature at par

Pay no interest

Receive more capital than invested=capital accumulation.

Avoid reinvestment risk

Not taxed deferred

Unless municipal there is phantom income= income not currently received but currently taxable

78
Q

Target date fund:

A

For a change who wants to put money into an investment that can be left alone for a period of time until expected retirement.

79
Q

Forms of business that allow for pass through of income and losses

A

Née constructions real estate direct participation programs

Oil and gas drilling DPP

S corporations

80
Q

Churning

A

Trading that is excessive in frequency or size and does not serve and investment purpose.

81
Q

Capping

A

Form of market manipulation that attempts to hold the price of the security down

Fidelity (12 decks)

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