SERIES 65- PART 4
the difference between the exercise (or strike) price and the current market value is considered salary to the employee
Nonqualified stock option
Interest rate risk (least to most volatile)
-long term vs. short term (long term more v) -same maturity- (lower coupon more v) -zero coupon bonds- MOST VOLATILE
contains the terms of the loan including the method of computing interest on the borrowed monet
credit agreement
exercising an option: A for american means exercising it ____________, e for european means excerising it _______________
anytime, expiration date
a living trust deals with how ____________
assets are distributed
Stock prices in the stock exchange are considered at __________
auction
the higher the ___________ the greater the risk
beta
is the danger that a specific stock's price will be driven by factors largely independent of its issuer such as a severe market plunge
business risk
which of the following orders would be used to protect a short sale profit?
a buy stop
A _____________is not required to open a margin account for a trust
a completed margin suitability form
When an analyst adds back the current year's depreciation to the net income, she is computing the company's
cash flow from operations.
Investors looking to minimize the effects of taxation on their investments would probably receive the least benefit from-
CORPORATE BOND
The debt-to-equity ratio is computed by dividing the issuer's long-term debt by their total capitalization
DEBT TO EQUITY
the discount rate that, when applied to the cash flows of an investment, equates the net cash inflows to the net cash outflows
INTERNAL RATE OF RETURN
_________________ from the client authorizing a stated amount of a specified security is sufficient to place an order. An agent must receive authority to place orders for a client whether or not there is a conflict of interest. Written approval from the client authorizing a stated amount of a specified security is not required before placing the order. However, __________ is necessary for the agent to exercise discretion in the account.
Oral approval, written authority
we can determine an earnings rate by dividing 72 by the number of years it takes for money to double.
RULE OF 72
because futures and forwards are not securities, they do not come under jurisidction of the _____
SEC
Among the benefits of an HSA is funds not used for health expenses may be invested in mutual funds and other securities. (t/f)
TRUE
Class A shares have a front-end load, but a low- or no asset-based sales charge. Class B and C shares don't have a front-end load, but do have a higher asset-based sales charge. Class T shares always have a 12b-1 charge.
TRUE
Exempt securities must NOT reestablish their exemptions at least annually. (T/F)
TRUE
If a solicitation is made for something other than impersonal advisory services, the solicitor must receive a signed statement from the client verifying receipt of both the adviser's brochure and the solicitor's disclosure document at the time of, or before, entering into a contract and ascertain whether the solicitor has complied with the agreement.
TRUE
Only a court of competent jurisdiction has the power to issue an injunction. (T/F)
TRUE
Working capital =
WORKING CAPITAL = CURRENT ASSETS-CURRENT LIABILITIES
have an exercise price above the current market price have no relationship to an existing stockholders proportionate interest have a long expiration period, sometimes as much as 10 years or even longer USUALLY ATTACHED TO A BOND ISSUE
Warrant
a living will deals with _________________
end of life instructions
type of exchange traded debt security offering a return linked to a market index or other benchmark rather than periodic interest payments
etn
a is a direct commitment between one buyer and one seller. If the position is held until the closing date, the forward seller is obligated to make delivery; the forward buyer is obligated to take delivery not standardized direct obligations between buyer and seller not easily transferred and are considered illiquid risks credit and trustworthiness of the other
forward contarcts
evolved to eliminate the problem of funding a buyer or seller for an upcoming cash market transaction. they also reduce the price risk inherent in changing supply and demand relationships
forward contracts
quantity of commodity quality of comodity time of delivvery place for delivery price to be paid ar delievry
forward contracts
to offset, liquidate a futures position before delivery, an investor must complete a transaction opposite to the trade that initiated (opened) the futures position. e o setting transaction must occur in the same commodity, for the same delivery month, and on the same exchange
future offset
As prices change, gains or losses are computed daily for all open futures positions on the basis of each day's settlement price. Gains are credited and losses are debited for each open position, long or short. All accounts for firms and traders must be settled before the opening of trading on the next trading day.
futures contracts
contracts that are exchange traded obligations the buyer or seller is contingently responsible for the full value of the contract. A buyer goes long, or establishes a long position, and is obligated to take delivery of the commodity on the future date speci ed. A seller goes short, or establishes a short position, and is obligated to deliver the commodity on the speci ed future dat
futures contracts
gives permission to the broker-dealer to pledge a customer's margin securities as collateral
hypothecation agreement
___________ content may be reused by others
interactive
granting permission to the broker dealer to ledn out the customer's securities
loan consent agreement
Options buyers are _________ option sellers are ___________
long, short
Stock prices in the over the counter market are determined by__________
negotiation
only seller is obligated on an __________ contract
option
________ originate on the exchange_________and ___________ originate with the issuer of the stock
options, rights and warrants
the two most important factors influencing the price of a derivative are the ______________ of the underlying asset and the ______________of time until the contract expires
price movement, length
forwards are used by __________ thats why a lot of futures contracts never really end with delivert
producer
sometimes referred to as preemptive rights are a privilege extended to existing holders of a companys common stock always have an exercise price slightly below the current market price of the existing stock they limit the time in which you have to decide to exercise your right, usually no more than 45-60 days
rights
they are given not sold to existing holder of the common stock they are exercisable at a price below the current market they have a short lifespan-- they will expire in 45-60 days they can be sold and then the buyer can exercise them although genreally unwise to do, they can be left to expire
rights
Funds withdrawn for qualified education expenses are always free of federal income tax.l. The maximum contribution limits are determined on a state level.
section 529
The Securities exchange act of 1934 does not give SEC the power to __________
set margin requirements
For a CIP, ____________ is not required
sex
mutual funds cannot have _______
short stock
Stock received as an inheritance ALWAYS has a long term holding period even when the actual holding period is _________ taxed as long term capital gains
short term
An exemption from registration under the Securities Act of 1933 is available to securities that are
sold only to persons resident in one state when the issuer is a resident doing business within that state
only _______ content needs preapproval
static
both ________ and ________ content may be editted by the originator
static and interactive
when an investor is not sure which direction the market will move but has a strong opinion there will be movement they buy A
straddle
are theoretical levels where the market supports the stock price (keeps it from falling below the stated level)
support level
beta is a measure of ___________risk
systemic
An investment adviser (IA) has a number of clients who need high-quality estate planning. These clients are referred to the Rox Law Firm, and in exchange, Mr. Rox sends those of his clients needing investment advice to the IA. The IA pays a referral fee to Mr. Rox of $300 for each referral who becomes a client. Under the NASAA Model Rule on Unethical Business Practices Of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers,
this is permissible, but only if disclosed to clients only if the fee is not based off of the size of the account, its a flat fee
Each option contract has three standardized items:
underlying asset expiration date exercise or strike price
When an investor writes an uncovered call (naked) the potential loss is ___________
unlimited
they are exerciseable at a price above the current market life is longer than rights and longer than call options as well when detached they can be traded like any other security do not have voting rights
warrants
When acting in the capacity of IA (or IAR), that is, when making recommendations or advising a client to purchase (or sell) a security, any transaction in which the firm is a PRINCIPAL requires disclosure in __________ to and consent (can be oral) from the client ________ to the completion of the trad
writing prior