Series 65

Trough Period

A trough is the latter stage of a recession. Unemployment is higher than normal, and with a lesser demand for goods and services, the inflation rate is low.

Efficient Frontier

An efficient portfolio is a feasible portfolio that provides the greatest expected return for a given amount of risk, or equivalently, the least risk for a given amount of expected return.

Discretionary Trading

An order is discretionary only if an agent selects : the size of the trade, the security, or whether to buy or sell. Selecting only price and/or time does not constitute discretion.

Trade Tickets

Any order ticket submitted by an agent for execution at a broker-dealer will always include the agent's name and that of the BD. All order details must be listed (e.g. the number of shares, limit or market, etc.), but the current market price is never included

Bond Strategies

Barbell - Short & Long-term Bullets - All mature same date Ladders - Bonds Maturing each year

Option Contracts

Can not be issued by corporation A fiduciary account may only trade options if expressly authorized to do so and if suitable for the beneficial owner of the account.

Open ended Fund

Continuous primary offering limited to one class of capital no secondary trading, must redeem shares on request EX Mutual Fund

A company that has issued cumulative preferred stock

Current and unpaid past dividends on cumulative preferred stock must be paid before common stockholders can receive a dividend. Bond interest is always paid before dividends. Dividends in arrears on cumulative preferred have the highest priority of dividends to be paid.

ETN's

ETNs are unsecured debt obligations carrying credit risk based on the issuer's credit rating. Fixed-income investments have the market risk more commonly referred to as interest rate risk, and they are usually callable. These are sophisticated instruments that are not suitable for conservative investors.

IA must disclose

Legal and disciplinary action successfully brought against an investment adviser must be disclosed to customers, as well as disciplinary actions that resulted in a fine in excess of $2,500. Convictions for a misdemeanor or felony involving securities or money within the past 10 years must also be disclosed.

Market Capitalization

Micro $50Mill-$300Mill Small Cap $300Mill - $2Bill Mid Cap $2Bill-$10Bill Large Cap Over $10 Bill

brochure rule of the Investment Advisers Act of 1940

No agreement between an investment adviser and a client may commence without delivery of the adviser's brochure. SEC rules require that a brochure, or summary of material changes, if any, must be delivered to all clients within 120 days of the end of the adviser's fiscal year. If there are no material changes, a brochure does not have to be sent.

Closed Ended Fund

Stock or ETF # of shares fixed issues common stock, preferred, and bonds has secondary trading like OTC

Technical Analyst

Technical analysts attempt to identify trends so they can predict market changes. They do this by reviewing past performance as depicted in charts and graphs. The type of analysis that attempts to value stock by examining a company's financial condition and growth potential is fundamental analysis.

CAPM

The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk, or the general perils of investing, and expected return for assets, particularly stocks.

The capital asset pricing model (CAPM) is used by many to assess the expected return of a security. If the current risk-free rate is 3%, the current return on the market is 10%, and a particular stock's beta is 1.4 with a standard deviation of 2.2, the expected return would be

The formula for this computation is as follows: 10% (the return on the market is a beta of 1.0) minus the risk-free rate of 3%, or 7%. Then, multiply that by the beta of this stock (1.4) to arrive at 9.8%. That is, the stock should return 9.8% above the risk-free rate of 3%, or 12.8%. The standard deviation is not relevant to this computation

In which of the following cases is a 3rd-party trading authorization acceptable?

Third-party trading authorization must be in writing; oral authority is never acceptable. If the email came from the client directly instead of the spouse, it would be acceptable.

Which items change when a company pays a cash dividend? Working capital Total assets Total liabilities Shareholders' equity

Total assets Total liabilities

A European style option differs from an American style option primarily in that it

can only be exercised on its expiration date

convertible bond

holders may share in the growth of the common stock the issuer pays a lower interest rate holders have a fixed interest rate

oppurtunity cost

is the return given up for an alternative investment when a risk-free choice is not made.

constant dollar plan and a constant ratio plan

the goal is to maintain a balance between equity and debt securities in the portfolio. This is done by selling equities as their price rises (the proportion has now changed) and buying equities when the prices fall to get back to the constant dollar or ratio.

An individual may NOT act as an agent for more than one broker-dealer

unless the Administrator, by rule or order, authorizes such employment