DEAN SERIES 7 FINAL NOTES
Cash Dividend is Taxable, what is the current yield of a Quarterly dividend of 25 Cents and the stocks market price is 15?
.25 * 4 = 1$ 1$/15 = 6.6%
Corporate and Muni bonds
1/8
1 Bond points is how many dollars?
10 dollars
How much is one bond point?
10$ 1% of par
QIB
100,000,00$ or more unregistered foreign or domestic securities.
Institutional client must file what form in a private placement?
144a
Which of the following is used to eliminate or reduce short position?
A closing purchase
An investor owning an option contract liquidates the position, On the order ticket, the RR would enter?
A closing sale
A client is interested in generating additional income on a stock they own, What would you recommend?
A covered call.
Which of the following is used to establish or add a LONG position
An opening purchase
Which of the following is used to establish or add to a SHORT position
An opening sale
BULLS
BECAUSE U R LONG LOWER STRIKE
Bonds trading "add interest"
Bond with accrued interest NOT zero coupon bonds.
Buyer needs to SIGN suitability statement for a derivative security
Buyer needs to SIGN suitability statement for a derivative security
BALANCED FUND
Contains Stocks and Bonds
Short Margin account Market value maintenance
Credit
Customer is concerned about the interest charged in a margin account, what would you direct them to?
Credit Agreement!!! Loan consent form is optional
What does Standard and Poors rating for bonds measure?
Credit risk
Ex Date for mutual funds
DREP All dates in an open end mutual fund is set by the BOD.
DATO 15
Disclosure document Account approval Trade Options agreement in 15 days
DIE 90
Dividends on stock plus Interest on the bonds minus Expenses equals Net Investment income At least 90% pass through
REITS and mutual funds
Do not pass through losses, only income Must distribute 90% net income to shareholders.
CAL and PUSH
FOR SPREADS ONLY Call Add to the Lower Push Subtract from the higher ALWAYS between the strike prices
SILO
FOR STRADDLES Short Inside Long outside
Dollar Cost averaging
If prices are FLUCTUATING, the plan will produce a lower average per share cost.
If a customer buys 100 XYZ at 18$ in a NEW margin account, how much do they deposit?
If the amount is under 2000, they pay in full.
All Debt denominated securities trade?
In a negotiated, Quote driven market Bond desk is going to give you a bid and an offer
What are some bonds where the buy does not need to pay the seller?
Income or adjustment Zero coupon Bonds in default
Interest charged on debit in margin.
Interest ADDS to the debit.
What are the 2 biggest risks for bonds?
Interest rate risk Credit risk
Whichever syndicate provides bid with LOWEST net interest cost
Is the syndicate that has won
GO bonds can be issued on a negotiated basis
Issuer selects Underwriter
FINRA 5% rule
It is for the SECONDARY MARKET Securities sold through a prospectus are exempt from this rule because it is THE SECONDARY MARKET.
Treasury Note or Treasy spread
1/32
When, as, and if issued Reg T deposit
50%!!!
MUTUAL FUND MAX SALES CHARGE
8.5% of POP
Equity Linked Notes
A Debt instrument Holder has creditor relationship with the issuer Typically a financial institution.
An RR sells an investment non sponsored by his employer without permission, this is known as?
A prohibited practice known as selling away.
ALPHA excess return over BETA
ALPHA excess return over BETA
AAA for discretion
Action Asset Amount Making a decision on anything of these is discretion.
How does the OCC select who pays an option?
By random FIFO CANNOT be discriminatory
A customer said they would like to be able to trade during the day and if possible, to purchase below the NAV. You would recommend?
Closed end mutual fund.
Which bonds trade T + 2?
Corporates and Muni's
How often are customer statements sent?
Every Quarter Unless penny stock
ADR's
Foreign security that trades in the US. CURRENCY risk.
Bonds MOST sensitive to interest rate income.
LONG and LOW
Warrants
Long term Exercisable ABOVE SWEETENER for bonds.
What bonds are subject to AMT?
Private activity bond
Selling a spread`
Selling DIRECTION volatility. If a customer doesn't think something will go a certain direction.
Mutual funds send their financial statements how often?
Semi Annually
Index options
Settle cash Exercise and option are T+1
Speculative options strategies
Start with the stock but don't end up with the stock.
Zero coupon bonds
Straight line accretion that taxes will be owned UNLESS from a municipality NO REINVESTMENT RISK GOOD FOR SOMEONE WHO NEEDS MONEY ARE A FUTURE DATE
Non recourse
They can not come after the limited partners for the loan. Recourse loan BAD bank can come after the limited partners
Muni flow of funds statement is contained in?
Trust indenture/bond contract
EPIC
US Exporters buy puts on the foreign currency US Importers buy calls on the foreign currency
Issuer needs a Cash advance
Underwriter says here's some cash give us a BAN When we raise that money we want a little extra
Selling Dividends
Violation of the Code of Conduct.
When will a variable annuity be a suitable Retirment plan?
When the person has maxed out other qualified retirement plans availible to them.
When are options taxed?
When they Expire!!!
When does a book entry security clear and transfer?
With journal entry.
If a bond is at a premium what is the yield?
Yield to Call
UTMA
Kids Tax ID No Margin/Short sales One minor - One Custodian per account
Random withdrawals from Variable Annuities are?
LIFO
An investor needs significant passive income, what would the RR recommend?
Low income housing (Tax Credit) Exploratory Oil and Gas Historic Real estate (Tax Credits)
Underwriters payments
Managers fee - Smallest Selling concession - largest Spread = Amount paid to issuer - Underwriter payment
Are stock dividends taxable?
NO The cost basis is adjusted.
Are stock dividends and stock splits taxable?
NOOO HOWEVER Adjust the cost basis More share at a lower price.
Are Advanced options strategies conservative?
NOOOO
Do investment clubs get breakpoints?
NOOOO
If a customer leaves town and their stock is dropping, what can the RR do?
NOTHING they need to talk to the customer.
Inside Market
Nasdaq Level 1 Highest bid Lowest Ask
Numbered Accounts
Need signed letter for account ownership Only RR and principal need to know Works just like any other account.
150,000 Long 70,000 Debit 80,000 Equity Investor Sells XYZ for 18,000 and buys ABC for 20,000. How much is required to deposit?
Net the 2 together 18,000 and 20,000 = 2000 Find SMA 150,000/2 = 75,000 80,000-75,000 = 5000 5000 excess equity 10,000 Buying power Needs to deposit 0$
Clearing firm
Order Department Purchase and Sales Department Margin Department Cashiering Department
Which CMO tranch has the least risk?
PAC
Retail "Sales literature"
PRE approved by principal. Correspondence PRE or POST
Equity REITS
Pay a high dividend Moderately risky
What are term bonds quoted on?
Percentage of par
If a customer is subject to AMT do NOT recommend?
Private Purpose non essential Bond Private Activity Bond
Benefits of REITS
Professional Management Diversification Ease of ownership Traded on an exchange LIQUID 75% for real estate 90% net investment income go to shareholders
If Competitive Muni
Publish a notice of sale in the bond buyer
When does a B/D send account statements?
Quarterly UNLESS penny stock or active trading.
MUNI NOTES ARE MUNI MONEY MARKET SECURITIES
RANS TANS BANS TRANS PAYDAY LOAN ISSUER gets it from underwriter
6 month holding period required for?
Restricted stock NOT control stock(officers)
Corporate bonds
SECURED BONDS Morgage bonds - secured by mortgages Collateral trust bonds - secured by securities placed in escrow Equipment Trust certificates - Major movable equipment UNSECRED BONDS Debentures Subordinated Debentures Income or adjustment - ONLY pay interest when earned(Trade Flat) Guaranteed bonds - PARENT company guarantees the debt.
Closed End investment companies
Shares are issued in a one time offering, THEN trade on an exchange or over the counter.
Rights
Short term Exercisable BELOW
Money Market Funds
Sold without a sales charge Typical maturities are 30 days or less
Zero Coup Bonds
Straight line Accretion Accreted interest is taxable unless from Muni bond Great for target date investment No reinvestment risk
What is the attorney for a muni bond?
The bond counsel They cover Tax Status The legality of the muni debt
What is the Ex date?
The first date on which the stock no longer trades with the dividend attached.
What does a Head a shoulders pattern indicate?
The reversal of a trend.
Which bonds trade T + 1?
Treasuries
Hedge funds
Very volatile Organized as private partnerships Distributed under Reg D Only institutional and accredited investors
Taxing authority is required for a GO bond
Voter approval is required for a GO bond
Corporate Resolution
What officer is going to trade the account Corporate BY LAWS is specific to margin.
If a bond is at a Discount what is the yield?
Yield to Maturity
What are serial bonds quoted on?
Yield to maturity.
Long term capital gains
You have to be AT risk. So if a person buys some shares and 3 months later buys at put option, he is no longer at risk and is subject to short term capital gains.