ECONOMIC INDICATORS
Keynesians
advocate government intervention in the workings of the economy through increased government spending, which in turn increases aggregate demand.
Yield to maturity and coupon rate have
an inverse relationship. -That is, the higher the YTM and the coupon, the lower (shorter) the duration.
Yankee bonds
are foreign bonds, denominated in U.S. dollars and issued in the United States by foreign banks and corporations.
Eurobonds
are issued by a borrower in a foreign country, denominated in a currency other than one native to the issuer's country. Yankee bonds are a form of Eurobond,
ADRs
are issued in the U.S. by domestic banks and represent receipts for securities traded on foreign exchanges. are issued by a borrower in a foreign country, denominated in a currency other than one native to the issuer's country. Yankee bonds are a form of Eurobond, but that is not the best answer to this specific question.
Monetarists believe that
believe in economy handled by Federal reserve over fiscal policy(Keynesians)
No annuity payment is ever treated as a distribution of
capital gains.
Section 529 plan
considered a security
The Sharpe ratio measures a stock's
defined as a fund's excess return (fund's return exceeding the risk-free rate) divided by the total risk (standard deviation).
The Uniform Securities Act authorizes the state Administrator to require
either oral or written qualification examinations of investment adviser representatives and officers of investment adviser partnerships or corporations officers of investment advisers to pass a qualification examination an applicant for initial registration to publish an announcement of the application in one or more specified newspapers published in the state investment adviser representatives to pass a qualification examination
Savant Investment Managers (SIM) has a client with a short position in PQR common stock. The position was initiated at a price per share of $50, and with PQR currently selling at $30 per share, the client is interested in a method that will allow him to protect some of the unrealized profit without an expenditure of funds. His representative at SIM could suggest
entering a buy stop order at $35. -Buy stop orders, commonly referred to as "stop loss" orders are designed to halt a loss or protect a gain. These are buy orders placed above the current market that become triggered if it happens that the stock should trade at or through the specified stop price. Buying the call options would also offer the protection, but the question specified no expenditure of funds.
The semi-strong form of the EMH states that security prices
fully reflect all publicly-available information. This would include all historical information.
The NASAA Model Rule permits performance-based fees
if the client has at least $1.1 million in assets under management or a net worth in excess of $2.2 million, provided the compensation is based on gains and losses. -Unlike the Investment Advisers Act of 1940, under the NASAA Model Rule, state-registered advisers must make additional disclosures, including the incentive to take additional risk.
The present value of a dollar
indicates how much needs to be invested today at a given interest rate to equal a specific cash value in the future
The 4 primary requirements of the CIP are the
individual client's name, physical address, DOB, and SSN.
Yield to maturity and coupon rate have an
inverse relationship. -That is, the higher the YTM and the coupon, the lower (shorter) the duration.
Beta
is a measure of relative systematic risk for stock or portfolio returns..
A unit investment trust (UIT)
is a type of investment company whose units are sold in the secondary market and is generally unmanaged, or passively managed. The trust manager initially selects the securities to be included in the portfolio and then holds those securities until they mature or the UIT terminates.
Inertial inflation
is an economic condition where the rate of price increases reaches a stable equilibrium and stays there until a shock to the system occurs, at which time, the rate of inflation changes.
Anchoring
is making irrational decisions based on information that should have no influence on the decision at hand.
Confirmation bias
is paying attention to information that supports a preconceived opinion and poorly made decision, while disregarding accurate, unsupportive information.
Regret aversion
is when the investor prepares herself in such a way as to avoid distress over an adverse outcome.
When the yield curve is positively sloped (and thus normal) ?
long-term bonds carry higher interest rates than short-term bonds of the same quality.
The weak form of the EMH states that security prices
relates to historical information only.
The strong form
relates to public and private (inside) information. One could conclude from this that both fundamental and technical analysis don't "work" in an efficient market.
A pattern of currency deposits designed to avoid currency reporting requirements is termed
structuring
Affinity fraud
targets members of identifiable groups, such as the elderly, or religious or ethnic communities
bottom-up approach.
the "micro" view of the economy
The longer the time to maturity,
the higher (longer) the duration.
Under the Uniform Securities Act, a registration statement for a security must be signed by
the issuer's chief executive officer, chief financial officer, and a majority of the issuer's board of directors
ERISA Section 404 (c) describes a safe harbor for 401(k) plan fiduciaries.
to provide at least 3 different investment alternatives with a range of risk and provide account access no less frequently than quarterly.
A living trust deals
with how assets are distributed and a durable power of attorney grants authorization to a person to legally act on behalf of someone who cannot do so.
the fund has had net redemptions over the past 6 months and asks you to explain how that might affect the fund's performance. You should explain that
1) performance will probably suffer because the fund's adviser will have to sell positions prematurely in order to meet redemption requests 2)many of the fund's expenses are relatively fixed so with less assets in the fund, the expense ratio will probably increase -When a fund has net redemptions, it means that less money is coming in than is going out. In order to meet those redemptions, the fund's manager will either have to sell securities that they planned to hold onto, or maintain more assets in cash (which generally will return less than other investments). Because the expense ratio is the annual expenses divided by the average annual assets, with less assets to cover the fixed expenses, the ratio will probably increase.
Nonagricultural employment
Coincident (or current)
Personal income, minus social security, veteran benefits, and welfare payments
Coincident (or current)
industrial production
Coincident (or current)
manufacturing and trade sales in constant dollars
Coincident (or current)
Commodity contracts are available on many different types of commodities. One of those types is precious metals. Included in the definition of a precious metal would be all of the following except
Diamonds are not a metal.
EDGAR stands for:
Electronic Data Gathering, Analysis, and Retrieval. -It is the easiest (and surely the fastest) way to obtain all of the financial information filed by reporting companies. It is available at SEC.gov.
the following types of business organizations do not protect owners' personal assets from losses incurred by the business?
General partnership & Sole proprietorship
This is known as the right of rescission.
In the case of an agent who mistakenly sells an unregistered, nonexempt security, broker-dealer should offer to buy back the security from the customer and pay the customer interest on the amount invested in the security for the period from the original purchase to the resale back to the firm, minus any income or profit realized by the client on the security.
Avg Prime Rate
Lagging Indicator
Avg. duration of employment
Lagging Indicator
Ratio of manufacturing and trade inventories to sales
Lagging Indicator
change in the index of labor cost per unit of output (manufacturing)
Lagging Indicator
change is the CPI for services
Lagging Indicator
ratio of consumer installment credit to personal income
Lagging Indicator
total amount of commercial & industrial loans outstanding
Lagging Indicator
Avg weekly initial claims for unemployment insurance
Leading
Avg. weekly hours in manufacturing
Leading
Building permits (housing starts)
Leading
Index for supplier deliveries - vendor performance
Leading
Index of Consumer Expectations
Leading
interest rate spread between 10-year treasury bond and the federal fund rate
Leading
manufacturers new orders for consumer goods
Leading
manufacturers new orders for non-defense capital goods
Leading
money supply
Leading
stock prices
Leading
Which of the following would be used to provide end-of-life instructions once a person becomes incapacitated?
Living will -The purpose of a living will is to give clear instructions regarding end-of-life decisions, such as organ donation or when to "pull the plug".
annuity vs. life insurance
One of the unique characteristics of an annuity (variable or fixed) is that it guarantees monthly payments for the life of the annuitant. Life insurance provides a death benefit, but not income.
NPV =
PV of CF − cost of investment)
prime rate
Rate of interest banks charge on short-term loans to their best customers - rises when the FRB increases the discount rate -decreases when the FRB decreases the discount rate
Among the differences between a Coverdell Education Savings Account and Section 529 plans are
The Coverdell may only be used by persons who fall within certain income limits—no such limits apply to the 529 plan. The Coverdell has contribution limits set by federal law; each state sets its own 529 limit. If the money is not used for education, it reverts back to the donor in a 529 plan but to the beneficiary in a Coverdell.
Under the NASAA Model Rule on Custody Requirements for Investment Advisers, an investment adviser who has custody of client securities or funds must do all of the following
The adviser must send clients quarterly, itemized statements listing the funds and securities in the adviser's custody at the end of the period and all transactions during the period. -The adviser must also arrange for an annual, surprise audit by an independent public accountant of client funds and securities. The adviser must notify the Administrator that the adviser has or may have custody of client securities or funds.(in writing)
The key word here is qualified!
The investment Juliette made was with pre-tax dollars, the money grows tax-deferred, and everything is taxed at distribution at ordinary income rates. Note: On the exam, all contributions to retirement plans are fully -deductible unless something in the question specifies otherwise.
Corporations have found that one way to increase employee motivation is to grant options to purchase stock in the company. Incentive (qualified) options differ from nonqualified options in all of the following respects
Whether the grant is of an ISO (qualified) or an NSO (nonqualified), there are no tax consequences to the recipient at the time of the grant. It is only after exercise (NSO) and sale after exercise (ISO) that the recipient of the grant has tax consequences. ISOs can only be granted to employees while the NSO can also be granted to members of the board of directors and even to vendors. With an ISO, capital gain (loss) treatment is available upon the sale of the stock if the recipient holds the stock purchased through exercise at least 1 year from the date of exercise and at least 2 years from the date of the grant. With an NSO, the recipient can only have ordinary income (loss) based on the difference between the exercise price and the market value when the option is exercised. Finally, if the recipient of an ISO does not exercise the option within 10 years of the grant, it is treated as an NSO for tax purposes.
A consent to service of process required by an Administrator is
a formal legal agreement whereby a registrant will be bound by a legal action or subpoena served on the Administrator as if it had been served on the registrant.
An investment adviser representative may describe dollar cost averaging to a customer as
a funding technique that will cause the average cost per share to be less than the average price per share
An individual investor specifies to her investment adviser representative that her portfolio must produce a minimum amount of cash each year. This would be considered
a liquidity constraint. -Liquidity constraints arise from an investor's need for spendable cash.
