#s you need to know 65

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the 3 core considerations in assessing whether an account has been churned are:

1 Turnover Ratio 2 Cost-to-Equity Ratio 3 In-and-out trading

indexed annuities can measure the movement of the index in 3 distinct ways:

1. Anual Reset 2. High Water Mark 3. Point-to-point

In any disciplinary PROCEEDING where denial/suspension/revocation of registration occurs, Admin is required to provide:

1. Appropriate prior notice 2. Hearing opportunity 3. Written findings of fact/conclusions ONLY WITH PROCEEDING NOT WHILE AN INVESTIGATION IS TAKING PLACE

IAs: cannot borrow money or securities from a client UNLESS the client is a: 1. 2. 3.

1. BD 2. affiliate of the IA or 3. financial institution engaged in the business of loaning funds

Dow Jones Composite Average - made up of ________________

65 stocks from the industrial, transportation, and utility sectors

If the IA is required to register with a State, that registration with be accomplished by the filing of ______ with___________

Form ADV with the State filing a copy with the SEC is not required

Buy stop order is used to __________ on a ______________ position Sell Stop order is used to _______________ on a ______________ position

buy protect profit on SHORT stock position Sell protect profit on LONG stock position

Series of periodic payment paid to someone for life for retirement income or for beneficiary

annnuity

SEC Filing Requirements IAs must file: Electronically - initial, amended, and ___________ brochures which are then publicly available through the SEC Website - annual amendments (Part 1A and 2A) must be filed when?

annual brochures within 90 days of the fiscal year end

Current Yield on Bond Formula

annual interest / current market price

Inverse ETFs and Leveraged ETFs are reset/rebalanced how often?

daily

Money Market funds credit dividends to customer accounts ________ and pay them out __________

daily, monthly

IRS rules state that investors must report amounts received from money market funds as ________

dividend income

reinvestment risk - risk that interest and (principal payment/dividend income) from (future/existing) investments may not be able to be reinvested in a way that will earn the same rate of return

dividend income from existing

what class would dividends payable go under on the balance sheet? what are dividends payable?

dividends that have been declared but not yet paid Current Liabilities

according to EMH, stock prices (do/do not) depart from the justified economic values that investors have calculated for them

do not

investing method that involves investing a set or fixed sum of money at regular intervals in specific investments, regardless of the market price

dollar cost averaging

internal rate of return is also called?

dollar weighted return

Measures the changes in the dollar value of a portfolio to total return

dollar-weighted return

Rule of 72 is used to find the amount of time it would take to ____________ one's investment

double

net worth (assets less liability) of a person at any point in time

estate

non-managed wrap fee is when ___________ and the client typically pays a ____________________________

no investment advice is given and the client typically pays a set annual fee to perform transactions instead of paying commissions on each trade

Annual Updating Amendment required to Form ADV

no later than 90 days after end of fiscal year of IA Firm

if the correspondence does not make any financial or investment recommendation or promote a product or service of the firm, does it need principal approval?

no

is a bona fide pledge or loan of securities considered a sale?

no

is it considered an offer to buy/sell when a newspaper or other publication is published in a state buy has had more than 2/3 of its circulation outside of the state during the past 12 months?

no

sales which appear to be a gift such as a gift of assessable stock

purported gifts

common stock pays dividends how often?

quarterly

business risks, regulatory risks, political risks, and liquidity risks are categorized as what?

unsystematic risks

C Corporations Net capital losses may be carried forward to offset capital gains for how long?

up to 5 years

definitions related to brochure rule "entering into" in reference to an advisory contract, does not include an extension or renewal _____________________ of any such contract which is in effect immediately before such extension or renewal

without material change

Form 8-K must be filed when?

within 4 business days of the occurrence of the material or corporate event

Orders may be appealed in court within what time after the issue?

within 60 days after issue

registration by coordination with the SEC and several state Admins would or would not require coordination with FINRA NASAA or MSRB under USA regulations?

would not require them

XYZ Convertible bond is trading at 95. Its conversion price is $25. XYZ shares are currently trading at $42. How many shares of XYZ common stock will the shareholder receive if the bond is converted?

1000/25= 40 shrs

federal covered advisor includes any IA who is an adviser to a registered investment company or manages a n investment portfolio with AUM of _____________

100Mill + : may register with SEC 110Mill + : MUST register with SEC

Investor buy 5% bond for $970 and 1 year later sells bond for $1010. What is the total return in dollars?

1010-970=40 .05*1000=50 40+50=$90 total return

All cash dividends of common stock and preferred stock are fully taxable at _________

15%

comprehensive report of a company's performance that must be submitted quarterly by all public companies to the SEC firms are required to disclose relevant information regarding their financial position

10-Q Form

bonds trading at par means its trading how much? typically paying interest rates _______

1000 equal to market rate

current assets = any asset that is likely to be converted to cash when?

within the next 12 months ex: cash, mkt value of securities held, accounts receivables, inventory

the administrator may by order deny, suspend, or revoke any registration or bar or censure any registrant from employment if he finds that it is in the public interest and the the applicant/registrant has willfully violated any securities or commodities when?

within the past 10 years

negotiable CDs minimum deposit

$100k

legal and taxable entity separate from its owners

"C" Corporation

corporation where income "flows through" to the shareholders and is taxed only once

"S" Corporation

Defined Benefit Plan - income or other benefits employee will receive after leaving employment are _______

"defined by the plan"

estate if there is no will, the distributions of assets to beneficiaries will be made by who? appointed by who?

"intestate" administrator appointed by probate court

_________ term sometimes used in wills to describe how property will be distributed when a beneficiary with children dies before the "testator" or maker of the will

"per stirpes"

CMOs Debts can be combined into a pool and used to collateralize the issuance of new securities that are sold to the investing public, including pension plans, investment company portfolios, etc. When mortgages, student loans, auto loans, or credit card debts are collateralized to create these securities, the debts are said to be ___________

"securitized"

cash dividends paid to investors are fully taxable at the fed, state, and local levels generally at a rate of

15%

Fee charged to investors when they redeem their shares. SEC limits redemption fees to ________

2%

the net asset value of money market fund shares normally remains priced at _____

$1/share

1 point on a T Note or T Bond is equal to ___ and quotes in _____

$10 and 32nds

accredited investor is any trust with total assets of _________

$10 million or more

one point on a bond is equal to ___

$10 or 1% of $1000

if current annual interest rates are 6% and an investor invested $10,000, at the end of 5 years what would that investment be worth?

$10,000(1+.06)^5=$13,382.26

M is Roman numeral for ?

$1000

a convertible bond has a conversion PX of $50. How many shares of CS are produced if the bond is converted?

$1000/$50=20shrs

Any person who violates the Investment Act of 1940 or any SEC rule or regulation is subject to a dine not exceeding _________, imprisonment for ________, or both

$10k, 5 years

maximum gift tax exclusion for gifts in a single year to one person = married couples may give = how are gifts and transfers between spouses taxed? how much can spouse give?

$15,000 $30,000 NOT taxable unlimited

exception to pay to play 2 year time out rule for contributions of ______________ per election, per covered associate, for any election in which that covered associate is not entitled to vote

$150 or less

If ABC had sales of $2,000 and net income of $200 and paid a tax expense of $150, how do you calculate the pre-tax margin?

$200+$150=350 350/2000=17.5%

Minimum deposit to open a margin account is ____________

$2000

net losses may be written off against ordinary income up to a maximum of ________________ per year

$3,000

exception to pay to play 2 year time out rule for contributions of ______________ per election, per covered associate, for any election in which that covered associate is entitled to vote

$350 or less

financial firms that transfer funds, including wire fund transfers of _______________, must collect, retain, and record certain info

$3k or more

SIMPLE PLANS: Employees are eligible to participate if ... receive ____________________ during what time?

$5,000 more more during each of last 2 calendar years and are reasonably expected to receive $5,000 or more during the current calendar year

Suspicious Activity Report should be filed for any transaction conducted through a Financial Firm involving (separately or aggregate) funds or assets of _________________ where the Financial Firm detects any known or suspected Federal Criminal Violation

$5,000 or more

most money market minimum withdrawals are set at ______

$500

Regulation A+ Offering - the total amount of the offering to the public is ____________________ in any ______________ period - ___________ registration statement used instead of a normal registration statement - ______________ is distributed to the public instead of a prospectus

$75 million or less in any 12 month period - short reg - offering circular

XYZ Corp declares a quarterly dividend of 15 cents per share. the current market price is $20. What is the dividend yield?

(.15*4)/$20= 3% current yield

NAV =

(assets-liabilities)/outstanding shares

a block trade is a trade of ______________ or more shares of common stock or securities with a market value of ____________, whichever is (smaller/greater)

- 10,000 or more shares - $200,000 market value - whichever of those 2 is greater

Sharpe ratio formula

(return of portfolio - risk free return)/ standard deviation

defined benefit plan - who can make contributions? - how are benefits determined? - typically used by what type of companies? - what type of participant benefits the most? - how are distributions taxed? - what are benefits based on? - do they get reviewed regularly by an actuary?

- - predetermined formula - typically used by government employers and large companies - benefits high salaried employees near retirement the most - taxed as ordinary income - based on compensation, years of service, and age - yes to make sure that they will meet future benefit payment obligations

accredited investors have - net worth over _______ excluding individual's primary residence or - earned income that exceeded ___________ in each of the last 2 years and expect the same for this year or _________ for married couples - Individuals who have the following licenses: ______ & remains for ________ after their licenses are terminated - Family offices with at least ___________ AUM - If offering concerns investing in a private fund, ______ - LLCs not formed 4 investing and have more than __________ in total assets - - entities not formed 4 investing but own more than ________ in investments

- $1 million - exceeded $200k, $300k for married - Series 7 (General Secs), Series 65 (IA), Series 82 (Private Secs Offering Rep) 2 yrs after licenses terminated - Family offices w/ 5 million AUM - employees of the private fund - LLCs with over 5 million in total assets - Rural Business Investment Companies - Entities more than $5 million in investments

married filing jointly - how many returns filed for both spouses? - what is combined? - can this be used if one spouse has no income? - can be used if one spouse died when?

- 1 return for both - combine income and expenses - yes - if died during last tax year

Part-time Employees 401K - Employees at least __________ years old who worked at least _____________ per year for _______________ years are now eligible for a company's 401K plan. As a result, employers must maintain 401K plans for employees who qualify under either of the following eligibility requirements: 1. Complete a _______________ (the existing ______________ requirement OR 2. ___________________during which the employees complete at least ______________

- 21 - at least 500 hrs/year for 3 consecutive yrs 1. complete a 1yr of service 1,000 hour requirement 2. 3 consecutive yrs at least 500 hrs of service

ABLE Program - established under what section of internal revenue code? - set up for what individuals? - contributions are used to acquire what? - are contributions tax deductible? - how are earnings taxed? - how are qualified distributions taxed?

- 529 A - disabled - units in a state trust usually muni fund securities - not tax deductible - earnings are tax free - distributions are tax free from beneficiary's taxable income

Keogh Plan - distributions can begin when without a penalty? - are distributions ever mandatory? - what happens if dont take distributions? - how are distributions taxed? - can distributions from a Keogh be rolled over into other accounts? what are they if so? when must rollovers be completed?

- 59.5 - RMDs begin no later than April 1st after tax year turn 72 or get 50% penalty tax - taxable as ordinary income - yes into another Keogh plan or into other types of IRAs or qualified plans - within 60 days must be rolled over

Traditional IRAs - distributions may begin when without a penalty tax? - funds withdrawn before the eligible age are subject to _________ penalty tax except for what? - distributions are mandatory at what age? - Required Minimum Distributions must begin no later than ____________________ - withdrawals are taxed how?

- 59.5 age - 10% penalty tax - except for death, disability, medical expenses, 1st time home purchases, higher edu costs, and medical insurance premiums - 72 - April 1st following calendar year that turned 72 - taxed as ordinary income

403B/ TSA - distributions can begin when without penalty tax? - RMDs? - Can RMDs be delayed? - distributions are taxable to plan holders how? - are rollovers allowed? if so to what type of plans?

- 59.5 can begin without 10% penalty tax - yes RMD April 1st following calendar year turn 72 - if dont take RMD then get 50% penalty tax - RMDs can be delayed until RETIREMENT if the person is still employed by the plan sponsor after age 72 - taxed as ordinary income with a cost basis of ZERO - Yes can rollover into another TSA plan or into other types of retirement plans like IRAs or qualified plans

Mutual Funds Investment Income or Dividends - Are they taxed?

- ALWAYS taxed as ordinary income whether they choose to take them in cash or shares

Money Purchase Plan - what type of plan? - requires _____________ to be contributed annually by __________ - plans are for what size of business? - designed for individuals with ___________________ earned on (full time basis? part time basis? either?) - who contributes? - is the retirement benefit certain? - what happens if the company does poorly or really well? does this affect the amount contributed to the plan?

- Defined Contribution Pension Plan - requires fixed percentage of compensation to be contributed to each eligible employee, annually by EMPLOYER ONLY - any size business or - individs with self-employment income from either a full or part time basis - employer and or employee contributions - retirement benefit is uncertain - contribution by employer is a known and fixed amount that doesn't change if the company does well or poorly

Contributions for 529 Plans - Investors making contributions to 529 Plans generally use the annual gift tax exclusion of ________________ or can aggregate the gift tax exclusion to contribute ______________ in one year to kickstart the program - if the aggregate gift tax is used, no further gift tax gifts are allowed for ___________ - married couples may contribute up to ______________ for each beneficiary as long as no further gifts are made to that beneficiary for the next _________

- Investors making contributions to 529 Plans generally use the annual gift tax exclusion of $15,000 or can aggregate the gift tax exclusion to contribute $75,000 in one year to kickstart the program - if the aggregate gift tax is used, no further gift tax gifts are allowed for 5 years - married couples may contribute up to $150,000 for each beneficiary as long as no further gifts are made to that beneficiary for the next 5 years

inflation/ purchasing power risk - especially true of ST or LT bonds? - fixed or variable annuities are extremely susceptible to this type of risk? - what type of asset does well in times of inflation?

- LT bonds - fixed annuities - tangible assets like gold coins

Traditional IRAs - How much of your contribution can you deduct if you are not active in a retirement plan at work? - How much of your contribution can you deduct if you ARE active in a retirement plan at work?

- NOT ACTIVE = deduct all of their contributions up to contribution limits - ACTIVE = possibly be able to deduct contribution depending on your income limits based on your tax filing status and your AGI

Roth IRA - are contributions to a Roth IRA tax-deductible to the owner's gross income? - when can you withdraw without a penalty tax? - upon retirement, qualified withdrawals of contributions are taxed how? qualified withdrawals of earnings are taxed how? - what type of individual would this benefit most? - Roth IRA owner required to begin distributions at what age?

- NOT tax-deductible - after tax $ - can withdraw any time - contribs and earnings are tax-free - high tax bracket - not required to begin distributions at a certain age

- is a rollover from a Roth IRA to a qualified plan allowed? - Is a rollover from a qualified plan to a Roth IRA allowed?

- Roth IRA -> Qualified is NOT ALLOWED - qualified -> Roth IRA is allowed

High Frequency Trading Firms (HFT) - most orders are for LT or ST trades? - utilize _______________ and __________ methodologies to maximize the speed of their market access and trading strategies - some are hybrids acting as _______________ & ______________ - some strategies may take ______________ approaches to the market which means they end each day in a flat position - some are not and take net long or short positions overnight

- ST trades - quantitative and algorithmic methods - hybrid = proprietary traders & Market Makers - "delta-neutral" approaches to market so end each day in a flat position

What can Keogh plans invest in?

- Stocks - Bonds - Treasury Bonds - Mutual Funds - Variable Annuities - Unit Investment Trusts

Can contributions to an IRA be invested in: (Y/N) - Stocks - Bonds - Mutual Funds - Life Insurance - Certain US Gov or State Issued gold, silver, platinum, and palladium coins and bullion - collectible items like rugs paintings diamonds and stamps - real estate

- Stocks Y - Bonds Y - Mutual Funds Y - Life Insurance N - Certain US Gov or State Issued gold, silver, platinum, and palladium coins and bullion Y - collectible items like rugs paintings diamonds and stamps N - real estate Y

UGMA & UTMA differences - __________ law allows virtually any kind of asset, including real estate, to be transferred to a minor - __________ law limits gifts/transfers to bank deposits, securities including mutual funds, and insurance policies - __________ terminates when minor reaches age of majority (18 for most states) - ___________ allows states to set a later transfer age

- UTMA = any kind of asset - UGMA limits - UGMA = majority age - UTMA = states set later age

contingent immunization strategy - is the portfolio actively managed? - what happens if returns in the portfolio fall below a certain level? - what is immunization of a portfolio and wen does it happen?

- actively managed - if falls below, active management ends and immunization of the portfolio occurs - when the duration of the portfolio's assets = duration of portfolio's liabilities

Revocable Living Trust - can assets be added? - can it be terminated? if so, by who and when? - is there a gift tax due on property transferred or contributed into the trust by the grantor?

- added at any time - terminated by grantor at any time - NO gift tax

Roth 401(k) plan - contributions are after tax or pretax? - distributions are taxed how?

- after tax - qualified distributions are tax free

coverdell - How are distributions taxed?

- after-tax contribution portion = tax free - earnings portion of distribution that is not used for edu is subject to ordinary income tax + 10% penalty tax

direct investments in real estate primary residence - get any deductions? - exclusions from taxes on _____________ on sale of the home ______________ for single filers and ___________ for joint filers if the owner has lived in the house for _______________. - liquid?

- annual income tax deductions (interest on mortgage payments - realized-LT capital gains - $250,000 for single - $500,000 for joint - for 2 of last 5 years - illiquid

variable universal life insurance - fixed or variable level of premium? - fixed or adjustable DB? - cash surrender value based on what? is there a guaranteed rate? how often is it calculated? - do policyholders choose the investments/ bear investment risk? - is this a security? does it need a prospectus? - how can lapsed policies be reinstated?

- flexible premium payments - variable DB - variable CSV - premiums and DBs fluctuate based on performance of separate account - no guaranteed CV - only guarantee is Rate of Mortality - good choice for a high risk tolerance - it a security

Who can participate in private non-governmental 457 Plans?

- for hospitals, unions, and charitable organizations - generally limited to a select group of management or highly compensated employees

2 categories of assets on balance sheet and what they include

- invested asset: mutual funds, over investment accounts at their market value (not original value) - Personal Property or Use Assets: cars, computers, household goods

Open-end investment companies - stand ready to issue and redeem shares how often? - shares are issued and may only be redeemed to who? - price of open-end investment company shares has what relationship with NAV?

- issue and redeem daily - only back to issuing investment company - directly tide to NAV of fund + sales load

BD exclusions (aka these are not bds): these people are not considered persons so wouldn't need to register as a BD if only worked with :

- issuers of secs - other BDs - banks, saving institutions, trust comps, insurance comps, and investment comps - pension/profit sharing trust - other financial institutions or institutional buyers (all institutional clients)

Financial Futures are standardized for: - - - -

- quality - quantity - delivery time - location of commodity

inverse ETFs

- seek to deliver the opposite of the performance of the index or benchmark that they track

variable life insurance - charges - fees

- surrender charges - management fees

qualifying widow(-er) with dependent child(-ren) - who can file this? - when can they file this? - allows who to use _____________ and the ______________

- surviving spouse can file - for 2 years after filing a joint return for the year of the spouse's death - allows surviving taxpayer to use joint return rates and the highest standard deduction

401k - can employers provide matching incentives in the plan? - can these plans have profit sharing programs attached? - how are the contributions taxed? - How do contributions and earnings grow? - can you make a rollover from a 401k to a Roth IRA? - who can make contributions? - distributions can begin when? - if withdrawn before age _______ then get a penalty tax - distributions are mandatory when? - Required Minimum Distributions are included in plan? - What if you don't take out your RMD? - can RMDs ever be delayed? - How are distributions taxed?

- yes - yes - grow tax deferred - yes - employees can also make after-tax contributions but those would not be deductible - distrib mandatory at age 59.5, or get 10% penalty tax if take out before - RMD start April 1st after calendar year that turn 72 - if take out after, then get 50% penalty tax - delayed until retirement if youre still employed by the plan sponsor after 72 and you dont own more than 5% of the company - taxed as ordinary income

Transfer On Death - do beneficiaries have to pay estate taxes or income tax on the transfer?

- yes estate taxes - no income tax on the transfer

All records must be preserved for a period determined by the State Administrator or Federal Law which for IA is ___________

5 years

Functions of Federal Reserve System

-auditing member banks -lending to commercial banks -acting as an agent for the US treasury -regulating bank credit -being a lender of last resort

an investor buys a taxable bond with a coupon of 4% at par The bond is exempt from state tax and the investor has a 28% marginal tax-rate. What is the after-tax yield?

.04*.72=2.88%

30% of her portfolio in Equities and an expected return of 10% 30% of her portfolio in Fixed Income and an expected return of 8% 20% of her portfolio in Global Funds and an expected return of 7% 20% of her portfolio in Money Market and an expected return of 3% what is the overall total expected return of her portfolio?

.3 x .01= .03 .3 x .08=.024 .2 x .07=.014 .2 x .03=.006 .03+.024+.014+.006= .074 or 7.4%

if IRR = required Rate of Return, NPV of investment = ________

0

For a no load mutual fund, 12b-1 fees or separate shareholder fees cannot exceed ________ of the fund's average net assets per year

0.25%

agent does not include an individual representing an issuer in effecting exempt transactions such as

1 isolated non-issuer trans 2 trans in certain covered secs 3 trans with investing employees, partners, or directors of the issuer if no commission or other $ is paid

coincidental indicators - move coincidental to economy

1 manufacturing 2 personal income 3 industrial production index 4 retail sales 5 GDP 6 Non-farm payroll workers

As of 2015, the IRS will only allow how many rollovers per year?

1 per year no matter how many are owned by an individual

LT Capital gains = capital gains where the security was held for how long?

1 year + 1 day

all private foundations are _________________ under the IRS tax code

501 (c)(3) organizations

lawyers accountants and broker dealers acting beyond the scope of their brokerage business do not qualify for the exclusion from registration if they

1) advertise themselves as advisers, AND/OR 2) Charge a separate fee for investment advice

Maturities of TBills

1,3,6,12 months

gain from sale of main home you live in, you may qualify to exclude from your income: 1. ____________ if file as single 2. __________ if file a joint return with your spouse Mary bought her home 20 years ago for $120,000 and sells it this year for $400,000. What is the taxable gain?

1. $250,000 2. $500,000 $400,000 sale -$120,000 orig =$280,000 adjust -$250,000 deduct =$30,000 taxable gain

mutual funds are subject to the regulations of:

1. '33 2. '34 3. '40

Corporate SEC Filings 1. 2. 3.

1. 10-Q 2. 10-K 3. 8-K

conditions that may have to be satisfied in a notice filing 1. engaged in business in US for ______________ 2. securities held by ______________ 3. total net worth of ____________ of total net worth of ________ and ______________

1. 36 consecutive months 2. 500 or more ppl 3. 4 mill or 2 mill and net pre-tax income from operations before allowances for extraordinary requirements for at least 2 of 3 previous fiscal years

1. How many commissioners are there of the SEC? 2. Who are they appointed by? 3. Can they have other business or outside employment? 4. Can they trade the markets which are subject to their regulation? 5. What are their terms? 6. can they be reimbursed by the SEC for their expenses?

1. 5 2. President 3. no 4. no\5. staggered 5-yr terms 5. yes

BDs cannot conduct BD services on the premises of a financial (bank) institution where retail deposits are taken unless the BD complies with the following rules:

1. BD in diff location than where financial institution's retail deposits are 2. written agreement with responsibilities and compensation of both parties 3. @ or b4 the BD needs to disclose that the securities products : a. NOT FDIC insured b. NOT obligations of financial institution or guaranteed by the financial institution c. subject to investment risk 4. promptly notify financial institution if any agent is fired by cause

When computing Total Return on a mutual fund that provides for reinvestment of dividends and capital gains distributions. the calculation would consider:

1. Beginning Price 2. Beginning Number of Shares 3. Ending Price 4. Ending Number of Shares

All of the following signatures are required on a registration statement for a security with the SEC: 1. 2. 3. 4.

1. CEO 2. CFO 3. CAO (Chief accounting officer) 4. majority of BOD

ETNs are issued on 4 basic sectors:

1. Commodities 2. Currencies 3. Emerging Markets 4. Strategy/Index (like S&P 500 Index)

Market Capitalization equity assets are classified 1. Micro Cap 2. Small Cap 3. Mid Cap 4. Large Cap

1. Micro Cap = mkt value <$250mill 2. Small Cap mkt val btwn $250mill-$2bil 3. Mid Cap mkt val btwn $2bil-$10bil 4. Large Cap mkt val greater than or equal to $10 billion

listed forms of income on income statement: 1. 2. 3. 4.

1. Normal income from employment 2. Alimony 3. Realized Capital Gains 4. Dividends and Interest

Common ETFs 1. 2. 3. 4.

1. SPDR 2. DIAMONDS 3. QQQ 4. HOLDERS

If a project has an IRR of 7.5%, then: 1. Project would be profitable and have a positive NPV if 2. Project would lose money and have a negative NPV if

1. cost of capital (what its going to cost to borrow money aka discount or hurdle rate) was less than 7.5% = positive 2. cost of capital was more than 7.5% then would be negative

HSAs have triple tax benefits: 1. deductible contribution limits of _________________ for individuals and _____________ for families + an additional _____________ catch up contribution for ppl _________ and older 2. Earnings? 3. Within limits, money can be used when?

1. deductible contribute: - individuals = $3600 - families = $7,200 - $1,000 catch up for 55 and older 2. Tax-Deferred Earnings 3. anytime for qualified medial expenses and is tax free when used for such purposes

3 classes of commodities

1. energy 2. metals 3. agricultural products

administrator may by order revoke/deny certain exemptions:

1. exempt transactions 2. exchange listed securities 3. securities of non-profit organizations 4. investment contracts issued by employee benefit plans

3 types of investment companies

1. face amount certificate companies 2. UITs 3. Management companies

SIMPLE IRA Employers may choose to make what types of contributions 1. OR 2.

1. matching contributions based on the elective contributions made by employees of up to 3% compensation 2. Non-elective contributions of a straight 2% of compensation to each eligible employee

Tax Filing Status Head of Household 3 requirements for this status are: 1. 2. 3.

1. unmarried on last day of the year 2. taxpayer paid more than 1/2 of the cost of maintaining a home 3. qualifying person lived with the taxpayer for more than 1/2 the year

permanent life insurance types: 1. 2. 3. 4.

1. whole life 2. universal life 3. variable life 4. variable universal life

if a GM 30-yr bond has a yield of 5% and the 30-yr T Bond has a yield of 3.5%, what would the credit spread be?

1.5% aka 150 BPs

- What happens if you dont rollover an account within 60 days?

10% penalty tax

NASAA Brochure rule requirements Annual Delivery: an investment adviser must deliver within _________________, an updated brochure and related brochure supplements which include or are accompanied by a summary of material changes OR Deliver a _________________

120 days of end of fiscal year for free summary of material changes that includes an offer to provide a copy of the other stuff

IAs requiring prepayment of more than _________ in fees per client 6 months or more in advance must provide in the brochure an audited BS for most recent fiscal year = Federal NASAA Rules, or specific State registered IA firm, or USA, then more than _______-

1200 fed 500 USA NASAA etc

Letter of Intent 1. Allows investor a ___________ period to reach the breakpoint amount

13 month period

Investment 1: purchased for $1,000, held for 6 months, then sold for $1,050 Investment 2: purchased for $2,000, held for 1 year, then sold for $2,200 Investment 3: purchased for $1,500, held for 2 years, then sold for $1,750 Find the return % on investment Then calculate the estimated total return

1: 50/1000=.05 or 5% *2=10% annual 2: 200/2000=.1 or 10% and 10% annual 3: 250/1500=.167 16.7% /2=8.35% annual

if real estate owned by the person filing chapter 7 bankruptcy is sold, who is paid?

1st = mortgage holder 2nd = any excess funds are paid to creditors and all other claims by the court appointed bankruptcy trustee

Any loss that exceeds the $3,000 write-off allowance must be carried forward to next year. the loss carried forward is then 1st 2nd then can be written off against ___________ up to a maximum of __________ for individuals

1st offset against net gains in that year 2nd written off against ordinary income up to a max of $3,000 for individuals

Recovery period shows an increase in the GDP for at least __________

2 consecutive calendar quarters

Maturities of T Notes

2 to 10 years

Pay to Play rules: ____________ prohibition on any advisers providing compensated services to a government entity following a political contribution to certain officials of that entity

2 year

each CMO tranche will have an average life expectancy anywhere from ____________

2-20 years

if a newspaper is published in state A but this newspaper is intended to be directed toward other states with _________ or more more of its audience outside of State A, then it is not an offer

2/3rds or 66.7%

Investor bought 100 shrs of ABC for $20k on 1/1 then on 12/31 shares worth $23k and during the year, the investor received a dividend check for $500. What is the investor's HPR?

23k-20k=3k+500= 3500/20000= 17.5%

correspondence includes any written including electronic communications to ____________ within ____________

25 or fewer retail investors 30 calendar day period

S&P 500 index is 2500 at the beginning of a given year, and it is currently at 2750. What is the difference between those 2 points? what percent of the starting index value is this difference?

250 points or 10% of starting index value

commercial paper is issued for a specific amount and has a set maturity of _________--

270 days

Structured Products Liquidity risk: is a 2ndary market guaranteed? are structured products designed for LT or ST?

2ndary market not guaranteed LT trading instruments not designed for ST investors should be willing to hold note till maturity

NASAA Rules and Custody Would NOT constitute custody: Receipt of checks drawn by the client and payable to a third party if forwarded within _______________

3 business days

Safe Harbor 404 C Provisions - under these guidelines, plan participants must have the ability to choose between _____________________ which are diversified. Must differ when it comes to _____________

3 categories of investments risk levels and expected return

If a Financial Firm becomes aware of a suspicious transaction the firm must file a SAR within how many days?

30 days

administrator may not institute a stop order because of a fact known to the Administrator when registration became effective unless within _______________.

30 days

when does withdrawal from registration become effective?

30 days after receipt of application for withdrawal or sooner if determined by the administrator provided that no proceedings are pending

an IA registered as a BD is exempt from the disclosure/consent requirement if the BD is acting as an adviser by means of: 1. Public Distribution of oral statements distributed to __________ persons who (do/dont) not pay for material. 2. 3.

35 or more do have to pay 2. written/oral statements that dont meet investment objectives of individuals or accounts 3. issuance of statistical info that doesn't contain opinions of certain securities

LEAPS - Long-term Equity Anticipation Securities have a maximum expiration of _________ from the time that they are created

39 months

Plan that allows a worker to save for retirement by having a portion of their salary deferred into a retirement account

401K

what type of retirement plan is also called a CODA plan? - cash or deferred arrangements of cash accumulation plans or capital accumulation plans?

401K

Tax-Sheltered Annuity Arrangement is also called by what?

403 B

SEC generally grants registration of a Federal Covered Adviser within ________ of the filing of the ADV

45 days

type of deferred compensation plan for employees of a state or local government or tax-exempt organization

457 B Plan

Record Keeping Rules for IAs All books and records must be preserved in an easily accessible place for not less than ______ years from end of fiscal year, during which the last entry was made on record and the first _______ years in the principal office of the IA

5 2

Money Laundering Abatement Act imposes customer identification requirements of financial firms including: Verification of the identity of any customer seeking to open an account within ____________

5 business days

The '34 act requires that those persons who become the owner of more than _______ of the outstanding stock of a stock listed on a national securities exchange must file a report with the SEC within ______

5% , 10 days "insider" = own 10%

15 yr loans with 180 monthly payments @ IR of 5%, amount borrowed will be approximately ________ of total paid @ IR of 7.5%, amount borrowed will be approximately ________ of total paid @ IR of 10%, amount borrowed will be approximately ________ of total paid

5% = 70% 7.5%=60% 10%= 52%

a bond with a duration of 5 will have a price movement of _________ for every _______ movement in interest rates

5% price movement for every 1% of movement in IR

30 yr loans with 360 monthly payments @ IR of 5%, amount borrowed will be approximately ________ of total paid @ IR of 7.5%, amount borrowed will be approximately ________ of total paid @ IR of 10%, amount borrowed will be approximately ________ of total paid

5%= 52% 7.5%= 40% 10%= 32%

in a no load mutual fund: 1. there is generally an expense ratio of ___________ 2. are you allowed to charge 12b-1 fees?

50 basis points (0.50) yes

Common and preferred dividends received by a corporation from another corporation are ___________ excluded from _________ would income from REITS qualify ?

50% excluded from taxable income only 50% of income is subject to tax NO

in a margin account how much does an investor usually have to deposit

50% of the purchase price

annuity payout option Joint and Last survivor annuity - the payment may be ______ to _______ of the original amount paid depending on the plan

50%-100%

recession definition: - mild consecutive _________ decline in stock prices, business activity, and employment. - ________ of negative (declining) growth in GDP

6 month 2 consecutive quarters

A blotter is a record of the daily activities of each branch of a BD. BDs must retain blotters and other records of original entry for how many years?

6 years

If the R-Value of a portfolio is .80 then the R^2 value is 64%. So if a portfolio with a 64% R^2 value rises 10%, you can conclude ___________

6.4% of that 10% rise can be attributed to the rise of the benchmark index

not more than _______ of a mutual fund's BOD may be considered "Interested persons" (employees officers etc)

60%

- Cost of Living Adjustment is applied to the social security benefit from age ___________

63 on

If NPV = 0 and hurdle rate is 7.5%, what is the IRR=

7.5%

72 rule formula

72/interest rate = number of years to double your investment

What report do you have to file if you have acquisitions, bankruptcy, or a change in the fiscal year

8-K

report of unscheduled material events or corporate changes at a company that could be of importance to the shareholders or the SEC

8-K

FINRA limits sales loads to ________

8.5%

A Tradition or Standard option contract has maximum expiration of

9 months

if an investment had total returns of 12% and the inflation rate during that time was 3%, the real return would be what?

9% Real Return = income return + realized capital gains return - inflation

An IA registered or required to register that has custody or discretionary authority over client funds or securities or that requires pre-payment of fees is required to maintain a minimum net worth at all times and to file a balance sheet with the state securities Administrator within ____________ following the IA's fiscal year

90 days

money market portfolios have an average weighted maturity of ________

90 days or less

If a Federal covered advisers AUM falls below _________- the adviser must withdraw its federal registration unless an exception exists

90 million

Regulated Investment Companies are funds which pay out at least ___________ of its net investment income annually

90%

Mutual Funds Investment Income or Dividends -- How much do Funds have to pay out to qualify as a Regulated Investment COmpany?

90% under sub chapter M of IRS Code - exempt from paying tax on divs distributed but is taxed on divs not distributed = Conduit/Pipeline Theory

money market funds have at least ______ of the fund's total assets invested in securities related in the top two categories by a NRSRO

95%

Beta = 1.0 what does that mean? Beta > 1.0 what does that mean? Beta <1.0 what does that mean?

= 1.0 means stock would be as volatile as index and would fluctuate the same rate as the index Beta>1.0 means expect this stock to be more volatile than the index and fluctuate in price more than the index Beta<1.0 means expect this stock to be less volatile than the index and fluctuate in price less than the index

AGI Includes Income from: A. Salary and/or commissions from gainful employment B. Interest payments from tax-exempt investments such as municipal bonds C. Unrealized capital gains D. Alimony or child support E. Investment income such as capital gains and dividends and interest payments

A. Salary and/or commissions from gainful employment E. Investment income such as capital gains and dividends and interest payments NOT FROM B. Interest payments from tax-exempt investments such as municipal bonds C. Unrealized capital gains D. Alimony or child support

used to determine some of the personal itemized deductions on a schedule A filing

AGI

Accredited Investors are natural persons with earned income of ___________ in each of the prior _________ and reasonably expect the same for the current year OR has a net worth of __________ either alone or together with a spouse

Accredited Investors are natural persons with earned income of _over $200,000_ in each of the prior _2 years_ and reasonably expect the same for the current year OR has a net worth of _over $1 million either alone or together with a spouse

Formula: AGI =

Adjusted Gross Income = gross income - adjustments

Agency CMOs - are backed by what? - GNMA Agency CMOs are made up of what? backed by what?

Agency CMOS are GUARANTEED and or issued by FNMA, FHLMC, & GNMA - GNMA pass-through secs are made up of FHA and VA mortgages that are GUARANTEED against default

Agency Cross Transaction

Agency Cross Transaction

certain taxpayers obtain tax advantages which reduce or eliminate tax liability. __________ is designed to recoup some of these advantages by imposing tax on certain tax preference items

Alternative Minimum Tax (AMT)

American Style Options can be exercised when? European Style Options can be exercised when?

American = anytime at discretion of the buyer European = only at Expiration

Is the Bid or the Ask the higher price?

Ask is always higher

Thelma opens account in 1/2018. Buys 200 shares of ABC paying $25/share. 8/2018 received qualified dividends of $1.50/share on ABC 2/2019 sells 200 ABC at $35/share. Current federal income tax rate = 28% and LT Cap Gains rate = 15% what is after-tax return?

B- 25*200=5000 S+ 35*200=7000 =2000*.15= 300 2000-300=1700 after tax gains 1.5*200=300 300*.15=45 300-45=255 after tax gains 255+1700= 1955 after tax gains divided by initial investment of 5000 = 39%

An investor buys 1 soybean futures contract at $0.45. Later, the investor sells the futures contract at $0.43. A soybean future has a contract size of 5,000 bushels. What is the result of this transaction?

B- .45 S+ .43 = -.02 x 5,000 = $100 Loss Gain or loss x contract size = total gain or loss

Types of Firms : B/Ds Employees Services Compensation

BDs Employees: Registered Reps (Fed), Agents (state) Services: Brokerage Activities (New Issues, 2nd Mkt Trans) Compensation: commision

broker or call loan rate is the rate at which

BDs borrow from banks to cover margin loans to customers

Basic Breakeven on Equity Options: Buy a Call = Sell a Call = Buy a Put = Sell a Put =

Basic Breakeven on Equity Options: Buy a Call = exercise price + premium paid Sell a Call = exercise price + premium received Buy a Put = exercise price - premium paid Sell a Put = exercise price - premium received

provides us with a measure of the volatility of this particular stock's price in relation or comparison to a benchmark such as an index or the market as a whole

Beta

price a market maker will buy from a customer

Bid

BD/Agent cannot transact business in a state unless who is registered

Both the Agent and BD

US dollar-denominated bonds issued by Latin American countries that are collateralized by US Treasury zero-coupon bonds

Brady Bonds

Part 2A of Form ADV

Brochure - description of IA's business practices - conflicting interests in client transactions and personal trading - must be written and in Plain English

Part 2B of Form ADV

Brochure Supplement - disclosures about individuals who provide the investment management - edu and experience over last 5 years - disciplinary actions over last 10 years - additional compensation from other sources for investment services rendered

yield to call is affected by: 1. 2. 3.

Call Premiums Time to Call date Price paid for the callable bonds

if the IA is required to register with the SEC, that registration will be accomplished by filing ______

Form ADV with the SEC

when assessing the safety of a bond issue, an analyst would use which of these? I. cash flows II. Profitability ratios III. Revenue to assets IV. Leverage ratios A. I. & III. B. II. % III. C. I. III. IV. D. I. II. III. IV.

C. would not use profitability ratios

Dividends: - "Cash" dividends are taxed how? when? - "Stock" dividends will affect the investor how? affect cost basis how? - Qualified dividends are taxed how? represent what dividends? - Non-qualified dividends are taxed how? include what? taxed more or less than qualified?

Cash - ordinary income to investor in year received regardless of reinvestment Stock - increase # of shares owned - decrease cost basis Qualified - taxed as ordinary income at reduced tax rate of 15% - represent most QUARTERLY dividends - CS and PS Non-Qualified - taxed at individ's ordinary income tax rate - paid by REITS, master limited partnerships, money market accounts - taxed more than qualified

if an individual files for bankruptcy under this, the individual agrees to repay all or some of their debt generally over a __________ period. To qualify, must have a steady income

Chapter 13 filing 3-5 year period

if a person files ____________ their property and debts are in the hands of the bankruptcy court

Chapter 7

Fiscal Policy of the US Government is set by _______ and deals with ___

Congress Gov Spending, Taxes, Welfare where all our tax dollars get spent

imaginary barrier between the investment banking department, research dept, and trading/mkt making dpt.

Chinese Wall or Information Barriers

HOLDERS stands for / represents what?

ETF - Holding Company Depository Receipts - reps 16 trusts related to largest Euopean companies traded on NYSE, Amex, and NASDAQ

DIAMONDS stands for / represents what?

ETF - represents Dow Jones Industrial Average

QQQ stands for / represents what?

ETF Reps NASDAQ 100 Index

SPDR stands for / represents what?

ETF Standard and Poors Depository Receipts - represents S&P 500 Composite Index

Do ETNs or ETFs have tracking errors?

ETFs have tracking errors

Primary Difference btwn ETF and index fund =

ETFs issue shares of common stock and those shares trade in the marketplace like common stock which is completely different than a mutual fund which trades once a day and is redeemed by the fund

term insurance can be for a Level death benefit: meaning DB stays the same, or increases, or decreases? the amount of premium paid for the policy may stay the same, increase, or decrease?

DB stays same premium can stay same for a specific period of time or increase over time

ETN (Exchange Traded Notes) are

DEBT instruments issued by banks

In a 401K Plan - ____________ requires that a plan administrator must furnish investment-related information for each option offered under a plan to plan participants _______________________ and ___________ thereafter? - does this information need to be filed with FINRA?

DOL (Department of Labor) - prior to or on the date the participant directs their investment and at least annually thereafter - dont have to file

agents of BDs must renew their registration by when?

December 31st

Form ADV (application form filed with SEC) Part 1:

Detailed info about IA for SEC including direct owners and executive officers of the IA but not require a list of the IAs clients

means of evaluation of securities, portfolios, or projects, collectively known as "investments" using the concept of discounting (present value)

Discounted Cash Flow DCF

Primary benefit of ________ for individual investors is that allow investor to participate and access markets and sectors which were previously unavailable to them or may have been unsuitable

ETNs

when doing capital needs analysis you would not consider: A. client's expected income B. # of dependents C. Savings D. Current rate of inflation E. Stock market fluctuations

E. Stock market fluctuations

net income on the income statement is also known as

EAT earnings after taxes

Operating Profit on the Income statement is also known as

EBIT Earnings Before Interest and Taxation

use a variety of environmental social and governance criteria to make investment selections that aim to create both competitive financial return and positive impact on society

ESG Funds = environmental social governance

a notice of withdrawal from registration as an IA

Form ADV - W

similar to normal index funds with a portfolio that mirrors a specific index or industry sector basket of securities

Exchange Traded Funds (ETFs)

CAPM expected return formula and what does it stand for

Expected Return = Risk-free Rate of Return + [Beta x (Market Return - Risk-Free Rate of Return)] Capital Asset Pricing Model

BDs must register with ____ and are regulated by _____________

FINRA FINRA and SEC

Discount rate is the rate charged by

Fed Reserve to banks to cover their temporary reserve needs

regulations. | Federal | State Law ____________ | __________ Regulators. _____________. | __________

Fed | State Law | Investment Act of 1940 | Uniform Secs Act Regs. | Secs Exchange Commi | State Secs Admins

Monetary Policy is set by ___________

Federal Reserve

form of registration used by Federal Covered Securities or established company with registration statement on file with the SEC

Filing or notice filing

Bureau of the US Department of the Treasury mission is: - to safeguard the financial system from illicit use - combat money laundering - promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities

FinCen = Financial Crimes Enforcement Network

Provide opportunity to invest in "bonds" without investing directly in one particular bond

Fixed Income Bond ETFs

NASAA Custody Requirements Notice must be given to Administrator if an IA has custody of client funds with what form

Form ADV

Registration as a Fed Covered Adviser is accomplished by filing _________-

Form ADV

If the BD changes its name or location, it must promptly file an amended __________ showing the changes

Form BD

these forms provide simple easy to understand information about the nature of the customer's relationship with their financial professional

Form CRS BD Form ADV Pt 3 IA

SEC Best Interest (Reg BI) Customer Relationship Summary since enactment of Reg BI, the SEC requires registered IAs (and BDs) to provide retail investors only with ______________ for BDs ______________ for IAs

Form CRS=BDs Form ADV Part 3= IAs

ABC: YTM=9%, Price=$950 DEF: YTM=10% Price=$875 GHI: YTM=11% Price=$825 if investor wants to have the highest return on investment which bond should he choose? What will he receive on that investment at maturity?

GHI because has highest YTM $1,000 Par - $825 Price= $175 Discount and get this at maturity

company that combines limited liability with pass-through taxation. Owners are called members.

Limited Liability Companies

Out of Growth Stocks, Blue Chip Stocks, and Utility Stocks, which have the highest and lowest retained earnings

Growth has highest because dont pay out dividends Blue Chip Stock has a dividend payout ratio of 50% so has 50% left as retained earnings Utility stocks have lowest retained earnings

If an RR is concerned that a client may have diminished mental capacity or dementia, the RR should contact a family member to determine if they have a ____________ for the client

Guardian Appointment

a divorced parent with custody of young children should file under what tax filing status?

Head of Household

proprietary trading firms that use high speed systems to monitor market data and submit large numbers of order to the markets

High Frequency Trading Firms (HFTs)

federal covered adviser is one that is registered under the

IA Act of 1940

IA Act of 1940: All books and records of an IA must be maintained in a readily accessible location for ________________ Under USA:

IA Act of 1940: 5 yrs from end of fiscal yr in which entry was made USA: determined by the administrator or by Federal Law

estate Federal Estate Tax return form = ______________ Must be filed when? by who?

IRS Form 706 within 9 months after decedents death by the estate's executor

IRS and taxation of ETNs

IRS has not made a final ruling on treatment of ETNs

convertible bond price : common shares received =

Par Value/Conversion Px

Investment Advisers Employees: Services: Compensation:

Investment Advisers Employees: IARs Services: Advisory Activities (Financial Planning, Managed Accounts) Compensation: fees

Investment Grade on S&P's Ratings = Speculative Grade on S&P's Ratings = What is used to show a high vs low relative standing for S&P? Investment Grade on Moody's Ratings = Speculative Grade on Moody's Ratings = What is used to show a high vs low relative standing for Moody?

Investment Grade on S&P's Ratings = AAA-BBB Speculative Grade on S&P's Ratings = BB-DD + =. high - = low Investment Grade on Moody's Ratings = Aaa-Baa Speculative Grade on Moody's Ratings = Ba-C 1 = high nothing for low

usually a husband and wife. upon the death of the husband, his interest passes automatically to his surviving widow and vice versa

Joint Tenants with a Right of Survivorship (JTWROS)

qualified, tax deferred retirement plan for self-employed individuals that can be set up as a defined contribution plan or a defined benefit plan and are more complex to set up than SEPs but have higher contribution limits than SEPs

Keogh Plan or HR-10 Plan

The BD will generally approve the account for options trading based on the suitability level of the investor. those levels are:

L1= covered call writing of equity options L2= L1+ buying calls and puts +writing cash covered puts +purchases of straddles or combos L3=L1+L2+spreads +covered put writing L4= L1,2,3+ uncovered writing of equity options +uncovered writing of straddles/combos +convertible hedging L5= L1,2,3,4 +uncovered writing of index option +uncovered writing of index options

LT goals = Medium Term goals = short term goals =

LT = >10years Med = 3-10 yrs ST = <3 yrs

Russell 1000 is what segment of the Russell 3000 Index?

Large Cap Segment

PPI (Producer Price Index)

MONTHLY measure of change in producer (wholesaler) prices of industrial and farm commodities like foods, lumber, oil, and gas - changes in this are an indication of upcoming changes in CPI

CPI (Consumer Price Index) aka Cost of Living index

MONTHLY measure of the change in the price of the average goods and Services bought by wage earners in select US cities - measures inflation

When evaluating bonds held in a portfolio, we would include what? A Maturity Date B Current Market Price C Coupon Rate D Par Value

Maturity date, coupon rate, and par value only

Defined Contribution pension plan which requires a fixed % of compensation to be contributed to each eligible employee, annually by the employer only. For businesses of any size, or individuals with self-employment income, earned on either a full- or part-time basis

Money Purchase Plan

simulation that runs thousands of chance scenarios to provide probable outcomes involving a number of random variables

Monte Carlo simulation

municipal yield -> corporate yield formula (corporate bond would have to yield you the corporate equivalent yield % to give you the same muni yield you get from buying the straight municipal bond)

Muni Yield/(100%-investors tax rate) = corporate equivalent yield

Ask on open end investment comp =

NAV + Maximum Sales Load = offering price

offering price =

NAV + Sales Charge

Bid on open end investment comp =

NAV = Redemption Price

can investment club qualify for a quantity discount by using an LOI?

NO

should you compare hedge funds performance figures against each other?

NO

Are alimony payments and child support payments... - taxable to the recipient? - tax deductible to the payer?

NO and NO

Can private funds advertise?

NO but direct marketing to specific potential investors is allowed

when tracking an index fund, should there be a deviation between the fund's performance and the benchmark?

NO if there is then it is a tracking error

Are investment company shares exempt from registration with the SEC under the '33 Act?

No

are clients allowed to buy on margin for new issues by members of the UW Syndicate?

No

No person can sue after __________ of the contract sale or investment advice, or ___________ after the discovery of facts of violation (whichever occurs first)

No person can sue after ____3 years ______ of the contract sale or investment advice, or _2 years_ after the discovery of facts of violation (whichever occurs first)

Are IAs required to provide discounts for multiple accounts from the same family or household?

No, however if such discounts are available, IAs must disclose the discounts to all clients

initial delivery NASAA Brochure rule requirements for IAs: An investment adviser shall deliver the Part 2A brochure and any brochure supplements required to a prospective advisers client when?:

Not less than 48 hours before entering into any advisory contract with such client or prospect OR at the time of entering into any such contract, if the advisory client has a right to terminate the contract w/o penalty within 5 business days after entering into the contract

who is allowed to make withdrawals from 529 plans?

ONLY THE OWNER

all securities trades that takes place off floor of exchange

OTC market

when a broker dealer is a primary distributor of a 529 Plan, the BD must receive and provide to investors ________________ which must be filed with ______________ and are available to who? which includes 1. 2. 3. 4. 5. 6. 7. 8.

Official Statement or Plan Disclosure Document - filed with MSIL - Muni Secs Info Library - available to public 1. information concerning opening an account 2. fees 3. costs 4. risks 5. investment performance 6. plan governance 7. administration 8. tax considerations

Once a private fund hits __________ investors and ___________ in assets, it is subject to reporting requirements of the Sec Exchange Act of 1934 and effectively is no longer a "private fund"

Once a private fund hits _500 or more_ investors and _More than $10 million_ in assets, it is subject to reporting requirements of the Sec Exchange Act of 1934 and effectively is no longer a "private fund"

Indication of what the market version as the earnings potential of a given company

P/E Ratio

Form ADV is used to register IAs with the SEC and the state. Part I provides: Part II provides:

Part I provides info on the IA and Part II provides the disclosures that will be made to the clients

who do variable annuities register with?

SEC pursuant to the Investment COmpany Act of 1940

typically non-qualified plans that allow an employee to voluntarily elect to have their employer take deductions (after-tax) from their paychecks to fund insurance, healthcare, or other items

Payroll Deduction Plan

overall return on a diversified portfolio formula =

Portfolio % x Expected Return = weighted value then add all weighted values together to get the overall total expected return

Client wants a minimum of 5% return on investments in preferred stock. Client discusses preferred stock which have fixed dividends of $1.50/shr/yr. At what market price of the preferred stock would this customer be able to achieve their desired rate of return?

Price = $1.50 annual dividend/ .05 required rate of return price = $30/share so if priced below $30 then have a rate of return that exceeds 5% at $30 = RofR=5% >$30 = RofR less than 5%

Pre-organization subscription transactions which are used by _______________ who intend to incorporate in order to acquire capital. Conditions which must be met to make a pre-organization subscription exempt from registration are:

Pre-organization subscription transactions which are used by ____fledgling companies: means growing companies__ who intend to incorporate in order to acquire capital. Conditions which must be met to make a pre-organization subscription exempt from registration are: 1. subscribers cannot exceed 10 2. no commission may be paid 3. payments may only be made after the security is registered 4. advertising is acceptable

____________ is used to determine Social Security Benefits - SS uses __________ to calculate the monthly benefit, so working (longer/shorter) may extend the monthly benefit but working after the full retirement age (will/will not) increase or decrease the benefit

Primary Insurance Amount (PIA) - uses 35 years of earnings to calculate - working longer may extend - working after full retirement age will not increase or decrease

Most Private Funds will have a: and must file a ______________ with _____________

Private Placement Memorandum, Subscription Agreement, and a copy of the organizational agreement Form PF with SEC

Promissory Notes, Commercial Paper, or Bills of Exchange issued in denominations of ______________________ are exempt from state registration and filing advertising and sales literature. These products are an obligation to pay _________ within ________________ of the date of issue and must be rated in ___________________ by a nationally-recognized rating organization. Promissory notes ___do/dont?____ have to be issued by a Federally Chartered Bank.

Promissory Notes, Commercial Paper, or Bills of Exchange issued in denominations of ___50,0000 or greater___ are exempt from state registration and filing advertising and sales literature. These products are an obligation to pay ___cash______ within ___9 months___ of the date of issue and must be rated in __1 of the top 3 categories__ by a nationally-recognized rating organization. Promissory notes ___dont____ have to be issued by a Federally Chartered Bank.

established to protect investors and interest in a trust or fiduciary relationship. requires practical approach to investing trust assets.

Prudent Investors Act

Qualified Purchasers include a married couple or individual with ___________ in investments and ownership by __________ related natural persons; a person (such as an institutional investor) who owns and invests (on a discretionary basis) ____________ in investments; or a trust not formed for the specific purpose of acquiring securities

Qualified Purchasers include a married couple or individual with _over $5million_ in investments and ownership by _2 or more_ related natural persons; a person (such as an institutional investor) who owns and invests (on a discretionary basis) at least $25 million_ in investments; or a trust not formed for the specific purpose of acquiring securities

Retirement Plan established and maintained by a private employer that meets the requirements of the Employee Retirement Income Security Act

Qualified plan

statistical measure of the correlation coefficient of a series of data points squared

R-Squared

Value represents the percentage of change in portfolio return that can be explained by a relationship with a benchmark

R^2

LIBOR

Rate international banks charge each other

maintains the stock record book and must account for all shares

Registrar

overall profitability of the company after expenses, interest, taxes, and dividends have been paid

Retained Earnings

permitting a reduced sales charge on new purchases when the total value of already-held shares + additional amount to be invested > sales charge breakpoint

Rights of Accumulation

Rollovers Roth IRA - can a rollover between a Roth IRA and another Roth IRA be done? How is it taxed? - can a Traditional IRA be rolled over into a Roth IRA? How is it taxed?

Roth IRA-Roth IRA = can be done tax-free Traditional IRA-Roth IRA = certain restrictions and taxable was income to the owner

rule is useful when attempting to give estimates of how long it will take an investor to double their money, given a specific rate of return on the investment

Rule of 72

yankee bonds must be registered with who?

SEC

IA must either register with ______ or register with ___________

SEC (Fed Covered Advisor) or with State where they have a place of business or any states where they have 6+ retail clients

Who regulates 1 registration of investment companies 2 disclosure documents like prospectus 3 proxies 4 annual reports

SEC ONLY not the states

investment companies must file reports with the SEC when? reports must be sent to shareholders at least ___________ which includes the 1. 2. 3.

SEC annually shareholders semi-annually 1. BS 2. IS 3. list of secs owned by the investment company

barbell portfolios are made up of what?

ST and LT bonds

the employer is not going to be responsible for losses in the employees accounts if the employee had a self-directed IRA and made the decisions themselves

Safe Harbor 404 c Provisions

protection from liability given to the employer/sponsor or self-directed plan if the employee/participant makes imprudent investment decisions and loses money

Safe Harbor 404C Provisions

mutual fund fees and expenses _______ are generally fees imposed on investors who buy their fund shares from a BD

Sales Loads

clients must receive a WRITTEN statement containing _______________ when a wrap fee is charged

Schedule H of Form ADV

Mutual Fund Fees and Expenses All fund fees and charges are identified in a fee table in the front of the fund's expenses under the heading _________

Shareholder Fees

helps differentiate whether returns are due to intelligent investment decisions or excessive risk

Sharpe ratio

Russell 2000 is what segment of the Russell 3000 Index?

Small Cap Segment

Federal insurance program that provides benefits to retired people and those who are unemployed or disabled

Social Security

As a general rule, if you are married, you are eligible for a _______________ Benefit of Social Security

Spousal

Calculating Investment for Desired payout in Perpetuity Elderly Client wishes to establish an account that is to provide their children with monthly income of $2,500 in perpetuity. The expected Rate of Return on the investments held within the account is projected to be 6%. What amount must be invested in order for each child to receive the monthly payout of $2,500 if perpetuity?

Step 1: Take your expected RoR of 6% and divide it by the number of payments in a year (monthly, so 12) 6%/12=.005 Step 2: Divide the monthly requirement by the monthly expected return as calculated in step 1 (.005) to find the required investment. $2,500/.005= $500,000 The elderly client must invest a total of $500,000 per child

When securities are purchased in a margin account, the securities will be registered in whose name?

Street Name so in name of BD

Cash Settlement for CS

T

T Notes, Bonds, TIPS regular way settlement in the secondary market aka buy from another investor

T+1

Reg way settlement for common stock

T+2

Settlement for ETFs is

T+2 Business Days

T Notes, Bonds, TIPS regular way settlement in the primary auction market aka buy from the government

T+3

occurs when an original trust transfer is made to more than 1 person, and at least 1 of the persons is a skip person and at least one other person is a non-skip person.

Taxable Termination

Roth IRA was established by what Act?

Taxpayer Relief Act of 1997

Brady Bonds are collateralized by what

US Treasury Xero-coupon bonds

Dollar Cost Averaging or Constant Dollar Plan

Total $ amount invested / Total Shares Purchased

Basic Balance Sheet Equation is:

Total Assets = Total Liabilities + Net Worth

debt to equity ratio formula is a measure of _______

Total Debt/ Total Net Worth (which is just shareholders equity) financial leverage

standard form of identifying the price earnings of a company and is calculated using the recent earnings of the company, generally when?

Trailing P/E past 12 months

upon death on an individual investor, or the last surviving account owner in a joint account, the assets in the account are passed on to the beneficiaries eliminating the need for probate

Transfer on Death (TOD)

similar to Sharpe ratio in that measures the risk adjusted return of a fund but uses Beta instead of SD as the denomination

Treynor Ratio

If the SEC issues an order against an adviser and the adviser wants to appeal, an appeal may be filed with ________

US Court of Appeals

Though investment companies create diversification they: 1. Do not __________ 2. Will not __________ 3. DO not _____________

X eliminate risk X reduce risk associated with currency fluctuation X eliminate tax liabilities

Can ETFs be purchased on margin?

YEs

Primary difference between current yield and YTM is that

YTM considered time remaining until maturity and current yield does not

US dollar-denominated bonds issued in the USA by foreign companies or governments

Yankee Bonds

Is an agent of a BD allowed to split commissions with other agents at the BD?

Yes but no outside agents. you dont need to notify the client beforehand if its split with another agent at your firm

An IA acts as a broker for both the advisory client and for another person on the other side of the transaction

agency cross transaction

Value Line Index is what?

a broad large cap index

12B-1 Fees are annual fees charged by _____________ against the fund's assets to cover sales and marketing expenses of the fund

a fund not by an IA

top-down investing starts with what?

a global outlook and then moves down

Fiduciary - if a guardian wants to open an account, the firm must obtain

a new account report form + a guardian Appointment Certificate issued by a court

If a client of an IAR becomes unable to make decisions, the IAR could only accept instructions from who?

a person with a written durable power of attorney

the performance of the ETN is linked to what?

a specific index or a specific strategy of investing

Palladium

ability to withstand extreme temperatures used for water purification and refining oil

callable bonds are normally issued with a call price that is (above/below) the par value of the bond (Call Premium)

above

Bonds trading at a premium have a market value of what?

above $1000

growth investors - focus on companies with __________ - generally have (higher/lower) than average future earnings potential and therefore generally trade with a (high/low) P/E ratio

above average earnings higher than average future earnings and trade with a high P/E ratio

fee charged to investors for maintenance of their accounts

account fee

What happens if the student decides not to pursue an eduction and they have a 529 plan?

account holder can request a refund and the refund will be subject to the plans policy on refunds and the earnings will be subject to federal income tax and a 10% federal penalty

Hedge fund investment is limited to what?

accredited investors, qualified investors, and semi-affluent investors

quick ratio

acid test ratio = current assets - inventory / current liailities

refers to active "stock picking" and market timing to constantly rebalance the portfolio to attempt to obtain returns in excess of a specific benchmark or expected return

active asset allocation

custody under NASAA

actual possession or authority to obtain possession

if youre an agent or an IA do you have to disclose your personal securities transactions to the client?

agent no IA has to disclose if their personal securities are consistent, inconsistent, or not executing transactions, with the advice given to clients

Proof of power of attorney only functions when the client is dead or alive?

alive

NYSE Composite index is made up of

all common stock on the NYSE including ADRs and REITs

inn context of settling the estate of a deceased person, the estate consists of:

all property real and personal owned by person - their liabilities at the time of death

what is the purpose of the consent to service of process?

allows the Admin to be served with legal documents when the applicant is being sued. Serving the Admin with legal documents would be as binding as serving the applicant

_________ is often referred to as the excess return relative to the performance of a benchmark index

alpha

gives investor an idea of how an investment performs relative to the amount of risk taken

alpha

stock is being compared to s&P 500 which is assumed to have a beta of 1.0. The market had returns of 11.25%. Our stock has a beta of 1.2 and the investor has realized returns of 16.5%. What is our alpha in this case?

alpha = 16.5% - (11.25% * 1.2) = 3% meaning that our stock returned 3% over the level of risk taken

All rules and forms of the Administrator shall be published and can they be amended? if so when?

amended only when changed

Alternative Minimum Tax would have to be paid if

amount of AMT exceeded the investor's regular tax after credits

term insurance can be for a decreasing death benefit meaning that amount of premium paid each year stays the same, increases, or decreases? the amount of death benefit will stay the same, increase, or decrease?

amount of premium paid stays same DB decreases each year

a sale is

any contract of sale or contract to sell a security FOR VALUE

what is considered a solicitation under the definition of solicitation for investment company shares

any oral, written, or other communication used to offer or sell investment company shares

USA: any person who willfully violates any provision of the act shall, upon conviction, be fined not more than ______________ or imprisoned not more than ______________ or both. No indictment or information may be returned more than ___________________ after the alleged violation. No person may sue more than ___________ after the contract of sale or the rendering of investment advice, or ________________ after discovery of the facts constituting the violation, whichever occurs first.

any person who willfully violates any provision of the act shall, upon conviction, be fined not more than _$5,000__ or imprisoned not more than _3 years__ or both. No indictment or information may be returned more than __5 years__ after the alleged violation. No person may sue more than __3 years_ after the contract of sale or the rendering of investment advice, or __2 years__ after discovery of the facts constituting the violation, whichever occurs first.

state

any state, territory, or possession of the US including Puerto Rico and District of Columbia

when can ETFs be bought and sold?

anytime during normal market hours

trading strategy attempts to lock in profit from a momentary difference in the price of a security between 2 or more financial markets

arbitrage

In 401k plans, income taxes (are/are not) deferred on contributions until distributions are taken from the plan. What tax do all plans have to do

are deferred - still subject to social security, medicare and state and federal unemployment tax

In today's market most equity indexed annuities (are/are not) considered securities must be registered with who?

are not considered must be registered with each state's insurance commission

how long must the surety/fidelity bond remain in force?

as long as the registrant is in business and for 3 years thereafter

distributions from 403B TSA plans are taxed how?

as ordinary income with a cost basis of 0

Retail customer (reg BI) defines a retail customer

as someone who receives investment advice and uses the advice NOT for commercial use

price customer will pay when buying

ask

price market maker will sell to a customer

ask

class of stock in which the issuing company has the ability to impose future reviews on stockholders for additional funds is

assessable stock

According to the Department of Education, a 529 plan is treated as an asset of the parent or the beneficiary for the federal financial aid qualification purposes? - assets in the child's name are assessed at a rate of ____________ for the ________________- as opposed to the parent's assessment bracket of ___________. - is it a good idea to make contributions to a 529 Plan when it comes to qualifying for financial aid?

asset of the parent - Childs name = 20% for Expected Family Contribution (EFC) - parents assessment bracket of 5.64% - YES good idea

IRR - assigns present values to future cash flows? - assign future values to present cash flows? - sets these cash flows (greater than/less than/equal to) the cost associated with the investment? - when the result is (zero/positive/negative) that rate is the IRR

assign present values to future cash flows sets them EQUAL TO the cost associated with the investment when the result is ZERO

transfer of rights and duties of a contract to another party

assignment

All required, kept records may be examined by the Administrator when?

at any time

dividends paid by REITs are taxed how?

at individual's ordinary income tax rate which is more than dividends usually paid to investors 15%

Program Trading involves how many different stocks with a total value of what?

at least 15 diff stocks total value of $1 million

Record Keeping Rules for IAs IA must preserve partnership agreements/incorporation articles for how long

at least 3 years after closure of the IA

exempt transactions: non-issuer transactions by registered agents at registered BDs if: (b) security is senior in rank to the common stock of the issuer and has been outstanding for ___________________________

at least 3 years without default

IA must review and modify as needed policies and procedures of security and cybersecurity to ensure the adequacy of the security measures and effectiveness of their implementation how often?

at least annually

NASAA Custody Requirements IAs must send account statements to clients how often?

at least quarterly

If the IA fails to maintain net worth requirements, the IA must notify the State Administrator when? And shall also file a report with the Administrator of their financial condition including: 1 2 3 4

at the close of business on the next business day 1. Trial balance of all ledger accounts 2. Statement of ALL client funds which are not segregated 3. Computation of aggregate amount of client ledger debit balances 4. Statement of number of client accounts

mutual funds are only priced when?

at the close of the market

income of an irrevocable trust is taxed how

at the trust's tax rate

solicitor is a person who

attempts to sell advisory services for an IA or refers clients to an IA for a fee

Fed Funds Rae is the rate that

banks charge each other for overnight loans

portfolio of bonds with concentrations of short and long term maturities but very few mid-range maturities - adjusted to maintain the long and short distributions

barbell portfolios

Structured Products Performance Risk: structured products pay a return based upon _________________. However, the performance of the structured product may not match the underlying asset if _______________

based on performance of underlying asset(s) may not match underlying if the structured product contains a cap on performance

SEC Delivery Requirements of a Current Brochure or Brochure Supplement(s): An IA must deliver to a client or a prospective client the IA's current brochure when? AND IA must deliver to each client when?, without charge, if there are material changes in the brochure since the last updating amendment: 1. 2. (a) (b) (c) (d) AND Deliver to each client or prospective client a current brochure supplement for a supervised person when?

before or at the time the IA enters into an advisory contract with that client annually within 120 days after the end of the IA's fiscal year 1. current brochure OR 2. summary of material changes (supplement) to the brochure accompanied by: (a) website address (b) email address (c) telephone number to obtain current brochure (d) website address for obtaining information about the IA through the IAPD system at the time that supervised person begins to provide advisory services to the client

portfolios that measure (above/below) the efficient frontier are considered sub-ideal portfolios that measure (above/below) the efficient frontier are considered ideal

below above = ideal

price customer will receive when selling

big

ascending, normal, or positive yield curve - would bond buyers want to buy ST or LT maturities? - what period of business cycle does this indicate? - investors will take on what risk? - are ST or LT yields lower? - ST Secs or LT secs have lower IRs?

bond buyers may want to buy longer-term maturities because thats where get best yield - indicates short term secs have a lower interest rate than long term securities - normal indicates economic expansion - ST yields substantially lower than LT yields - investors will take on credit risk

flat yield curve... if interest rates rise, the yield curve would do what?

bond buyers should consider short and intermediate maturities bc lots of uncertainty - indicates economic uncertainty "steepen"

if an IA receives notification that a client has died, the IA should do what?

cancel any open orders and contact the attorney or executor handling the client's estate for directions on how to handle the account

evaluates the expected return of an asset/investment by setting it equal to the risk-free rate of return plus a risk premium assuming that investors demand higher returns for greater risk

capital asset pricing model CAPM

If an investor only just recently bought shares of a fund and are paid capital gains distributions would they be long term or short term?

capital gains distributions are always long term to the investor regardless of how long the shares have been held

use ____________ to determine the amount of life insurance needed to fund future goals should they pass away sooner than expected

capital needs analysis

used to determine if an individual has enough life insurance to fund their future financial goals

capital needs analysis

Personal Property on an individual's BS would include

cars, computers, and household goods, but NOT mutual funds or other investments

IRR determinations are dependent on what?

cash flow

gives investors an idea of the company's cash flow over a specified period of time

cash flow from operations

record of the cash or cash equivalents coming into the company and leaving the company

cash flow statement

generally used by a business rather than an individual and allows the business to reorganize and pay its creditors

chapter 11 Filing

excessive trading for the purpose of generating excessive commissions or fees is also referred to as

churning

handle the processing of settlements of securities trades

clearing agencies

when investment company shares are selling at a discount to the NAV

closed-end investment company

Prime rate is the best interest rate charged and set by ________ on loans to ____________. Normally the __________

commercial banks their creditworthy commercial customers highest rate of all IRs

When compared to other types of securities, ______ typically keeps up with the rate of inflation best

common stock

does preferred stock and or common stock have voting rights?

common stock only

dividend discount model is used to determine ______

common stock values

risk that a company will fail to keep up with competing firms and new developments in the industry or sector or could go the other way if a company jumps ahead of other companies and expects to capture market share with new products

competitive risk

technology company expects to capture market share with a new product has what type of risk?

competitive risk if the product fails

cash fee may be paid to affiliated solicitors of the adviser if ___________

complete disclosure of relationship with the IA is made to the client

Conservative capital structure vs speculative capital structure has

conservative = large% common outstanding small% bonds outstanding speculative = large% bonds outstanding small% common outstanding

A person offering/selling securities by untrue statements or omission of material fact is liable. Buyer can sue to recover what?

consideration paid plus interest and reasonable attorney's fees - less any income received

discretionary income

consumer income spent after essentials like food, housing, and utilities have been paid key economic indicator because spending this money can boost the economy

Mutual Funds Investment Income or Dividends -- if the investor decides to reinvest the dividends, how will this effect the investor's cost basis

cost basis will go up

Tax Preference Items Subject to AMT Incentive Stock options - value of incentive stock options at time of purchase for a taxpayer is generally the difference between _________________

cost of stock purchased on exercise and the market value of the stock on that date

ETN have what type of risk that an ETF doesn't have

counterparty risk because the liability of the ETNN rests with the issuing bank and there are no actual products backing the ETN (unsecured). For this reason, if the bank goes bankrupt or defaults, the holder of an ETN will become a creditor of the bank

nominal yield of a bond is the

coupon rate/ interest rate of the bond

S&Ps anf Moody's evaluate the ______________ of corporate, government, and municipal bonds and emphasize the ________ risk associated with the bonds

credit quality default risk = Interest & Principal risk

difference between 2 bonds of similar maturity, generally a corporate bond and a treasury bond

credit spread

equity indexed annuities interest rate caps the cap on increases is 5%. If the index goes up by 10%, then the equity indexed annuity is

credited with the cap of 5%

US balance of payments deficit improves due to

credits to balance of payments, money coming into US 1 New foreign investment in US 2 commodities being exported 3 spending by foreign tourists or entities in US 4 repayment of loans made to US 5 increased dividends and income earned on foreign investments

current ratio formula = standard minnimum is : most accurately describes the company's _______

current assets/current liabilities min = 2:1 ratio liquidity

Electronic trading platforms run by large investment banks and hedge funds for institutional investors to trade stock privately and anonymously off the floor of an exchange to obtain price improvement if a large block of stock is being traded - alternatives to stock exchanges - provide huge amount of liquidity for block trades

dark pools

ex date for cash transactions is when

day after the record date

As the CPI rises, purchasing power ____

declines

annuity payout option annuity whose contract provides that payments be postponed until a number of periods or years have elapsed

deferred annuity

income payments do not start until a later date in the future usually when the annuitant retires

deferred annuity

zero coupon bonds are also referred to as

deferred interest bonds

If you are an Active Participant in a Retirement Plan at Work in regards to deducting contributions for an IRA, what type of plans could you fall under? ___________________ = individ who is not excluded under eligibility provisions of plan is considered active participant if he/she is eligible to participate for any part of the plan year ending with or within the tax year, even though the individual has not elected to do so, failed to meet min requirement etc _______________________ = individ is considered an active participant if contributions or forfeitures are allocated to the individual';s account for the plan year that ends with or within that tax year

defined benefit plan defined contribution plan

what type of plan is a 401K retirement plan?

defined contribution plan

contract that is valued based on the value of an underlying asset, index, or security

derivative

Earnings from REITS come from

difference between rental income and interest paid on borrowed money

point-to-point means that the level of credited interest is based on __________________

difference or percentage of the difference in an index value over some period of time

access persons

directors, officers, and partners, and its supervised persons who have access to non-public information regarding securities transactions

illustrates a statistical range of potential returns for an investment or a portfolio's returns tool to help measure the risk of an investment

dispersion

provides a tool to determine the price at which a common stock should be trading considering the discounted value of potential future dividends

dividend discount model

measure of the sensitivity of a bond's market price to changes in interest rates

duration

IA must amend Part 2 information how often to provide a current brochure?

each year within 90 days of fiscal year end

Total Income on the income statement is also known as

earnings after taxes

Brochure Supplement - disclosures about individuals who provide the investment management - edu and experience over last _______________ - disciplinary actions over last _______________ - additional compensation from other sources for investment services rendered

edu = 5 years disciplinary actions = 10 years

in modern portfolio theory represents a set of or group of portfolios that will provide the highest return at each level of risk incurred

efficient frontier

modern portfolio theory - what is the founding principle?

efficient frontier

investment theory that states it is impossible to consistently "beat the market" because in an informationally-efficient stock market, current share prices always reflect all relevant information

efficient market hypothesis

savings account containing funds which would cover 3-6 months of living expenses

emergency fund

403B / TSA Plan - who can contribute?

employer: - non-elective contributions employee: - elective salary contributions - after-tax contributions

purpose of a surety or fidelity bond

ensure that registrants have sufficient funds to cover losses to customers resulting from theft or other dishonesty for which they are legally liable

market orders are entered when? do they have priority?

entered at the opening on an exchange always have priority

zero coupon bonds duration always = __________________ coupon bonds always have a (higher/lower) duration vs zero coupon bonds?

equal to its maturity coupon always lower because bonds pay interest whereas zero coupon has no interest payment

capital appreciation strategy would have a portfolio consisting mostly of ________

equities

provided payments linked to a specific stock index like the S&P 500 annuity

equity indexed annuity

In connection with the solicitation of investment company shares, stating/implying shares are sold w/out commission, are "no load", or have "no sales charge" is illegal if associated with the purchase of the shares there is: a SEC Rule 12b-1 fee or a service fee if such fees in total ____________________

exceed .25% of average net fund assets per year

Alternative Minimum Tax (AMT) include: For Oil and gas Programs: 1. excess of (straight line/accelerated depreciation) over (straight line/accelerated depreciation) is a tax preference item. (straight line/accelerated depreciation) takes equal amounts of depreciation over the life of an asset whereas (straight line/accelerated depreciation) takes large amounts of depreciation in the early life of the asset 2. The excess of _________________ over the _____________ 3. Amount by which (tangible or intangible?) drilling costs in a tax tear exceed ___________ of taxpayer's net income from oil and gas properties

excess of accelerated over straight line straight line is equal amounts of depreciation over life accelerated depreciation is large amounts in early life of asset 2. excess of % depletion over the adjusted basis intangible drilling costs in a tax year exceed 65% of taxpayer's net income

court appointed representative of the estate who is responsible for the administration of the estate

executor

the exception to the 10 day rule that investment advisers must abide by in regards to discretionary power over a client's account is

exercising discretion as to time and price only does not require authorization

business cycle order

expansion/recovery, peak, contraction/recession, trough

Modern Portfolio Theory Portfolio Examination ____________ is the calculation generally used when making this determination

expected return

the Final Prospectus must be received by customers purchasing new issues when? The Administrator may require that a prospectus be sent when in regards to the sale of a security?

final P must be received not later than with their purchase confirmation Admin may require that a prospectus be sent before the sale of a security

Equity-Linked Notes (ELNs) - debt security but differs from the traditional fixed-income security in that the ______________________________. - Can issuers ever put a limit on how much return the investors can receive? - what can they include?

final payout is based on the return of the underlying equity (which could be a single stock, index, or basket of stocks) - Yes. can include a cap on the return - limited to equity only

analysis focusing on company's financial statement, management, and profitable

fundamental analysis

review of factors that could affect the value of a company including the overall financial health of the company, the competency of its management, and economic and market conditions

fundamental analysis

For debt securities, in calculating DCF, the future cash flows are referring to _________________

future coupon payments and the final principal payment

calculations are generally used to determine what the value of a fixed sum of money invested today at a specific IR will be worth at a future date taking into account reinvesting and earning interest on interest

future value & compounding

legal binding contract made on the trading floor of an exchange to buy or sell a specific commodity or financial instrument at some point in the future

futures contracts

Unconsolidated Subsidiary - Parent company's financial statement would carry the unconsolidated subsidiary's __________________ as an ______________ and would be found in the footnotes of the parent's balance sheet

gains and losses as an investment

will - does not indicate which part of the property should be taken by whom

general bequest

type of average of a set of positive real numbers when averaging interest or growth rates

geometric mean

___________ fund includes both foreign and domestic issues

global

for non-qualified distributions from a Roth IRA Account, - portion of the distribution may be included in the account owner's _______________ - amount included will generally be subject to ________

gross income and be subject to 10% penalty tax on early withdrawals

Structured Products Principal Risk is guaranteed by ___________ and only if ____________.

guaranteed by the issuer only and only if note is held to maturity

tax-advantaged medical savings account set-up with a qualified trustee, such as a bank or insurance company

health savings account (HSA)

in a client's advisory contract is a disclaimer and is intended to relieve the advisor from liability for conduct where the client may have cause under state or federal law. ILLEGAL

hedge clause

many investors use inverse funds for what purpose? inverse funds can also be leveraged and are sometimes called ___________

hedging purposes Short ETFs

A HIGH Treynor Ratio means that a fund will have (high/low) historical returns when compared to market-related risk

high

Variable annuities have high or low levels of expenses and fees compared to investment company shares with similar features to the annuity?

high

a (high/low) P-B could indicate a growth stock a (high/low) P-B could indicate an undervalued stock

high P-B = growth stock low P-B = undervalued stock

does a high SD or a low SD means it is riskier?

high SD = riskier

A (high/low) cost basis results in a lower capital gain.

high cost basis = low capital gain

when compared to other types of securities, _____ typically maintain price and provide the best returns during periods of deflation and during extended recessions

high quality bonds

cost-to-equity ratio measures what

how expensive the trading in the account has been

A tenancy by entirety is a form of concurrent ownership that can only exist between a _________

husband and wife

written agreement needed to pledge a customer's securities for a loan in the customer's margin account

hypothecation agreement

how does an inverse ETF profit?

if an index declines and loses money if the index rises

if an investor is considering investments A and B, the opportunity cost would be what?

if choose A -> lost opportunity of investing in B

mutual funds that have a portfolio that mirrors a broad based index portfolio purpose is to keep up with the index, not beat the index

index funds

IMF - International Monetary Fund is funded by ________ and its purposes are to promote ____________ in ________

industrialized nations monetary and exchange stability international trade

after annuitant has deposited their single premium payment, the income payments to the annuitant begin immediately after the start date and are paid for a specific period of time or life of annuitant

immediate annuity

annuity payout option annuity contract bought with a single payment and a specified payout plan begins right away

immediate annuity

definitions related to brochure rule _______ is investment advisory services that do not purport to meet the objectives or needs of specific individuals or accounts general statement/advice

impersonal investment advice

if mortgage rates decline significantly in the next few months, a customer who owns a CMO would be most concerned with what type of risk?

implied call risk -> as mortgage rates fall, many current mortgage holders will refinance their mortgages at lower rates and the CMOs will be prepaid before the expected maturity date

variable life is convertible to whole life when?

in 1st 2 years of policy

fixed assets are not expected to be converted to cash, or at a minimum, are not expected to be converted to cash when?

in next 12 months

Safe Harbor 404C provisions is in what type of plan? refers to the protection from liability given to the employer/sponsor of a _______________ plan if the employee/participant makes imprudent investment decisions and loses money

in qualified plan - self-directed plan

buying and selling the SAME security repeatedly within a short period of time

in-n-out trading

IMF - International Monetary Fund. This organization is funded by _________________________ and its purposes are to _________________

industrialized nations promote monetary and exchange stability and international trade

tendency of an inflation rate to remain constant or consistent unless there is a demand shock or a supply shock

inertial inflation

risk that the return from an investment will not cover the loss in purchasing power caused by inflation

inflation risk

dollars received in the future will buy less than in the present

inflation risk/ purchasing power risk

the internal rate of return expressed as a % represents where the _______________ for the project or the investment being analyzed

inflows = outflows

If someone died and these securities were left for you in a will, these are considered a

inheritance

NASAA delivery of the brochure and related supplements may be made electronically if the investment adviser: in the case of an initial delivery to a potential client, ________ other than initial delivery,

initial delivery = verifies that copy of brochure and supplements got to client other than initial = gets each client's consent before sending the brochure and supplements electronically

risk that fixed income investment's value will change due to a change in interest rates

interest rate risk

business cycle

interests rates follow whatever it does

equity indexed annuities participation rates if the index goes up by 10% and an investor's participation rate is 80%, then investor's equity indexed annuity __________

is credited with 80% of a 10% increase, or is increased by 8% (.8*.1)

Rollovers - rollover to Roth IRA is or isn't allowed? - do you have to pay income tax on the distribution before you roll it over into the Roth account?

is permitted have to pay income tax first

Qualified Domestic Relations Order (QDRO) - issued by who? - part of what division in a divorce or legal separation? - divides/ splits a _______________________ by recognizing ____________________ in the plan

issued by a State court - property division - retirement plan or pension plan - recognizing joint marital ownership interest

Certificate of Deposit (CD) - is issued by who? - debt/equity? - fixed/variable interest rate? - set maturity date/no set maturity date? - can you withdraw funds? - considered a liquid investment?

issued by a bank debt instrument fixed interest rate and a maturity date - can withdraw but will have to pay a penalty - not considered liquid

outstanding shares formula

issued stock - treasury stock = outstanding stock

annuity payout option income payments are made while both annuitants are alive, and then the survivor continues to receive payments after the death of the other annuitant

joint and last survivor annuity

annuity payout option payments last as long as both annuitants are alive and stop upon the death of either annuitant

joint life

strategy which involves the purchase of fixed income securities with different coupon rates and different maturities to reduce interest rate risk and re-investment risk

laddering

the administrator may by order deny, suspend, or revoke any registration or bar or censure any registrant from employment if he finds that it is in the public interest and the the applicant/registrant has been convicted of any misdemeanor involving securities when? has been convicted of any felony when?

last 10 years anytime

function of fed reserve : lender of __

last resort

divorced spouse qualifies for spousal or survivor benefits if the marriage lasted ________________ based on ___________________.

lasted 10 years or more based on the ex-husband or ex-wife's social security earnings record

annuity payout option annuitant will receive regular payments until death, but if the annuitant dies before a chosen period has expired, the beneficiary will receive payments until the period certain ends

life annuity-period certain

annuity contracts are issued by ___________

life insurance companies

order to buy or sell a security at a specific price or better

limit order

_______________ is the primary vehicle used for Direct Participation Programs

limited partnership

real estate partnerships, oil and gas programs are investments which allow the investor certain tax advantages

limited partnerships

risk that an investment will not be able to be sold quickly enough to prevent a loss

liquidity risk

the best upside protection with options would be _________

long call

are annual expenses on ETFs generally high or low

low

Changing the primary reserve requirement maintained by member banks: _________ the reserve requirement would pump more money in the credit system thereby stimulating the economy. Inflation is not a near threat

lowering

lump sum vs installment taxed

lump sum = tax exempt installment = interest = taxable

Due to time value of money, it is usually better to take lottery winning as (lump sum now or periodic payments)

lump sum now

Dow Jones Industrial Average is made up of ________________ - considered an indicator for _________________

made up of 30 selected large cap blue chip stocks divided by a constant considered an indicator for large cap stocks

dealers that maintain an inventory of OTC securities and are willing to buy and sell for their own accounts on a regular and continuous basis

market maker

BDs who maintain a firm bid and ask price in a given security by standing ready to buy or sell from their own inventory at publicly-quoted prices

market makers

an order to buy or sell a security at the best price available when the order reaches the marketplace

market order

Semi-Affluent Investors do not meet the criteria of being accredited or qualified but _____

meet minimum investing requirements

unincorporated association - liability?

members have unlimited personal liability for any legal action taken against association

call for an "additional" deposit after a security has been purchased one margin and the market value of the security has declined in value

minimum maintenance margin call

Hybrid REITs =

mix of equity and debt investments

value that occurs most frequently in a series of data points

mode

investment theory that attempts to optimize expected returns for a portfolio for a given level of risk or attempts to minimize risk for a given amount of return

modern portfolio theory

US balance of payments deficit increases due to

money is flowing out of US 1 Increase in US investments abroad 2 US tourists spending abroad 3 US loans to other countries 4 Raising dividends and interest payments on foreign-owned securities of US issuers

hedge funds usually allow for sale or redemption of shares how often?

monthly, quarterly, or annually

Bond ETFs are (more/less) liquid than the bonds themselves

more

do arbs make trading markets more or less efficient? Why?

more efficient because once these price discrepancies are discovered, they are quickly adjusted, as the arbitrage opportunity (disparity) no longer exists

Registration would also be required for interests in limited partnerships and intrastate offerings of corporate securities where ____________ investors will participate

more than 10

CMOs (Collateralized Mortgage Obligations) - Mortgage-backed security that passes through ___________________ from a ________________ to investors how often?

mortgage backed security that passes through interest and principal payments from a pool of mortgages to investors monthly

Real estate prices move how compared to prices of financial assets like stocks and bonds

move in opposite direction

type of technical analysis average price of a security ofver a specific amount of time the price move is smoothed out and helps an analyst identify trends

moving averages

tax minimization = investment objective what should they invest in?

municipal bonds for tax-free income

BDs must provide _______________ on the routing of customer orders and execution quality

must provide quarterly reports

an efficient trading market is one with (narrow/wide) or (big/small) bid/ask spreads

narrow or small big/ask spreads

Earnings Per Share =

net earning/ outstanding common shares

Earning Per Share on Common Stock

net earninngs/ common shares outstanding

if an IA firm is a limited partnership and one of the limited partners or corporate shareholders becomes insolvent or declares bankruptcy, could this be grounds for registration revocation of the firm?

no not grounds for firms registration

sometimes issuers have to file in a state when issuing securities, but would they also have to register as a BD?

no not required

when investigating a potential violation or examining a firm's books and records, does the Admin need to provide appropriate prior notice, hearing opportunity, and written findings of fact/conclusions?

no that only is required in a disciplinary proceeding which only happens once the investigation is complete

does the '40 Act regulate the level of returns made to clients?

no thats a function of management and investments

Spousal IRA: - nonworking spouse.. can be opened in whose name? - what type of IRA is it - how much can be contributed? - how much can be deducted?

opened in the nonworking spouse's name - Traditional IRA - Traditional IRA contribution and deductions

an accounting method which does not include long-term costs, but which does include net earnings plus non-cash expenses such as depreciation and amortization, as well as changes in working capital

operating cash flow or cash flow from operation

category on income statement that shows profitability after expenses, but before payment of interest and taxes

operating profit

Margin of Profit formula =

operating profit/ gross sales

economic term that describes the value of the next best choice that one foregoes as a result of making a decision

opportunity cost

the CSV will be taxable as _____________________ if it exceeds the total premiums paid

ordinary income

category one balance sheet that include intangible items such as intellectual property and goodwill

other assets

alpha of 3% means what?

our investment out performed the amount of risk taken by 3%

permanent life insurance flexible premium payments means the policyholder can either pay premiums __________ or ___________-

out of pocket or have them deducted from the CSV

Annual Fund Operating Expenses are paid how?

out of the fund's assets portfolio rather than a separate fee charged to investors

currency transaction report must be filed for transactions involving currency (cash) of _____________ for 1 person in the aggregate in a _______________.

over $10k in a single business day

modern portfolio theory - places more value on (overall portfolio/ individual investments?) 4 steps/considerations=

overall portfolio 1. security valuation 2. asset allocation 3. portfolio optimization 4. Performance Measure

if grandmas will says 25% to all 4 kids, and will says ____________ Since Vickie passed away, Allie and Katie would then be entitled to split her 25% and will says _____________ since vickie passed away, the other 3 living children would then split the will as 1/3% each and Allie and Katie would get nothing

per stirpes = Allie and Katie split vickie's 25% per capita = Allie and Katie get nothing

Cash Flow Statement - point in time or period of time? - tracks _______________ in order to determine the _____________ - generally show: 1. 2.

period of time - tracks inflows and outflows to determine net cash flow 1. income or sources of cash: salaries, wages, dividends, and realized capital gains 2. outflows or use of cash: rent, utilities, loans, taxes OWED, insurance payments

Tax filing status - types of filings are based on the person's ________________ when?

person's marital status on the LAST day of the tax year

disposable income

personal income remaining after personal taxes can be spent on essentials or nonessentials or it can be saved

Registered IA must establish a code of ethics that requires access persons to report how often their personal securities holdings? and how often their personal securities transactions to the CCO? The information may not be more than _________________

personal secs holdings = annually personal secs transactions = quarterly X more than 45 days old

form of charting where specific entry and exit points are established

point and figure type of technical analysis

in ETN the bank promises to repay ________________ when?

principal amount less investor fees at final maturity

guarantees are guaranteed as to payment of

principal, interest, OR dividends

Qualified Plan - established and maintained by (public/private) employer - meets requirements of what act? - are contributions made by the employer tax deductible or not tax deductible to the employer? - do employees have to pay current income taxes on the contributions made by the employer?

private - are tax deductible to the employer - employees dont have to pay current income taxes on contributions by employer

private sector employees: public sector employees:

private = corps, small bus, bus owners public = fed, state, local govs

do public or private foundations have to pay out a minimum of their assets each year in the form of grants or providing charitable activities?

private foundation

Private CMOs are issued by who

private institutions: banks, investment banks, and home builders

HPR formula =

profit or loss/ investment or cost

plan by which a company shares its profits with employees designed to give employees an incentive to be productive

profit sharing plan

If the IRR exceeds the required rate of return/ hurdle rate then the project is expected to be (profitable or Not profitable?)

profitable

trades based on signals from computer programs usually entered directly from the trader's computer into the market's computer system and executed automatically

program trading

In the US does the progressive tax rate cause the marginal tax rate to increase with increasing salaries? Or does the marginal tax rate cause the progressive to increase with increasing salaries?

progressive causes marginal

changes of material fact (change in ownership, or the filing of complaints) must be reported when to the Administrator?

promptly

BDs can't execute any transaction in a margin account without securing client written margin agreement when?

promptly after transaction

disclosure document that describes a public offering of a new issue

prospectus

can public or private foundations obtain funds from government agencies

public

annual report - public or private companies must provide to shareholders? - chronicles the company's activities over what time period? - contains the company's _________________

public over past year financial statements balance sheet income statement cash flow statement

Are All Administrative hearings public or private?

public unless determined otherwise

Changing the primary reserve requirement maintained by member banks: ________ the reserve requirement would reduce the amount of funds for loans and credit thereby slowing the economy and fighting high or rising inflation

raising the reserve requirement

believes stock market prices are random and not influenced by past events

random walk theory

difference between the highest value and the lowest value in a series of data points

range

types of dispersion:

range, variance, standard deviation, and mean

Indirect investment in real estate - trust or corporation uses investors' money to buy and operate income properties

real estate investment trusts

income investing involves accumulating assets such as _______________ at the highest possible return with lowest possible risk

real estate, stocks, bonds, mutual funds

Long-Term Capital Gains - realized or unrealized profits? - earned on assets held for how long? - gain is taxed at rate of ________ tax liability =

realized - 12 months + 1 day or longer trade date to trade date - 15% tax liability = net LT Gain x .15

capital gains distributions on an investment portfolio are derived from

realized LT gains on the portfolio

switching investments in response to market conditions and interest rates

rebalancing

changes in tax rates is what risk

regulatory risk

Form ADV Part 2

required disclosures about prospective and existing clients aka The Brochure Rule

alpha= 0% means what? alpha<0% means what? alpha>0% means what?

returns received were adequate for the amount of risk taken alpha less than 0 means returns received were not adequate for the level of risk taken alpha more than 0 means returns received were greater than adequate for the level of risk taken

Treynor Ratio Formula =

risk adj return/beta remember that risk adj return = total return of investment - risk free rate of return

as a bond approaches maturity, the interest rate risk (increases/declines) interest rate risk is greater in the (earlier/later) years of a LT bond?

risk declines as approaches maturity risk is greater in earlier

additional return an investor can expect for taking risk above and beyond risk-free investments

risk premium

Sharpe ratio is the _____________ return relative to a portfolio's ______________

risk-adjusted volatility

Traditional IRA holding money from a distribution from a qualified plan or 403B plan

rollover IRA

used as a conduit between retirement accounts

rollover IRA

Fee charged to a customer who buys shares of some mutual funds and normally pays the fee upfront at the time of purchase

sales load

how do you determine the capital gain or capital loss on the investment?

sales proceeds - cost basis

investment strategy where securities are purchased in increments to achieve any overall total goal to attain an average purchase price as the value of the security is declining

scaling in

annuity payout option highest amount of payment to the annuitant

single life or life annuity

annuity contract holder buys contract 2 ways

single premium = lump sum paid to life insurance company periodic premiums = series of installment payments

ETN Characteristics - secured/unsecured? - debt/equity? - principal protected/not principal protected?

unsecured debt securities that are NOT Principal protected

when portfolio managers move from investing in 1 sector of the economy to another

sector rotation

BDs shall not execute any transaction in a margin account without ____________ promptly after transaction

securing client written margin agreement

if you are an investor with securities that have appreciated in value, should you contribute those securities or should you contribute cash to to a charitable foundation? why?

securities because current mkt value of securities = cost basis of the deduction any unrealized capital gain on security = waived

such as Bloomberg and ADP are companies that provide info about securities or quotations on a current and continuous basis - NOT bona fide newspapers, business publication of general circulation, financial institutions

securities info processors

any evidence of an interest in a common enterprise in which the investor expects a profit from the managerial efforts

security

Limited Registration of Canadian BDs and Agents a Canadian BD is registered in Canada and resides in Canada with no office or other physical presence in any State within the US can effect transactions in securities with or for A person who is from Canada and now is a resident of a State in the US whose transactions are limited to those in a _______________

self-directed, tax-advantaged retirement plan in Canada that is administered solely through a Canadian Broker Dealer

open market operations : Fed would buy or sell treasury securities to slow down the economy to fight high or rising inflation

sell

When a BD effects transactions (including private securities transactions) not recorded on the regular books or records of the BD which the agent represents

selling away

Interest on a bond is paid ________

semi-annually

bonds pay interest how often?

semi-annually

principal of the Treasury Inflation Protected Security is adjusted to CPI how often

semi-annually

Fixed Income (Bond) ETFs During slow markets, there is a (sizable/close) relationship btwn market price and the NAV In fast markets, there is a (sizable/close) relationship btwn market price and the NAV

slow = close relationship fast = sizable

a way to "pay" for products/services received from a BD by directing order flow to a BD

soft dollar arrangements services received by the IA could include reports, applications and real time quotes but NOT the payment of the salary of an analyst

Where are REITs traded?

some OTC and some on floor of stock exchange

Structured Products Are structured products callable?

some are

a prospect for variable life should be a person with

some investment sophistication and a tolerance for possible wide fluctuations in CSV

Will - transfers a particular asset to a particular beneficiary

specific bequest

Holding Period Rate of Return = measurement of return of time period _______________

specifically held by investor

an investment adviser that is compensated under a wrap fee program for sponsoring, organizing, or administering the program, or for selecting, or providing advice to clients regarding the selection of other IAs in the program

sponsor of a wrap fee program

a measure of volatility of a security or portfolio from the expected return based on past performance

standard deviation

are standard equity indexed annuities principal and credited interest protected?

standardly yes.

bottom-up investing starts with what?

starts with a company-by-company analysis of individual firms

are IARs registered at the federal or state level?

state only

memo order from a customer that becomes a market order if a trade takes place at or through the price stated in the memo

stop order

type of allocation where the assets in the portfolio over the long term are balanced and generally kept at an assigned balance

strategic asset allocation

is strategic asset allocation a form of passive? or is passive a form of strategic?

strategic is a form of passive

equity indexed annuity modern approach - recent developments in equity indexed annuity markets have created new products which are structured like ___________ with a ___________ interest rate, but also have a ___________ interest rate which is linked to an index

structured like fixed annuities with fixed interest rate, but have fluctuating interest rate thats linked to an index

FINRA defines ______________ as securities derived from or based on a single security, a basket of securities, an index, a commodity, a debt issuance, and or a foreign currency

structured products

occurs when an investment manager strays or departs from their normal investment philosophy or style generally seen as a negative and historically has not proven to be successful for the manager

style drift

Structured Products Credit Risk: structured products are subject to the credit risk of who? Is there a government-backed guarantee on structured products? What happens if the issuer is unable to meet its financial obligations?

subject to credit risk of the issuer no government backed guarantee if unable to meet, investor may lose entire investment

Risk Tolerance is an objective or subjective factor?

subjective

document describing the features of an employer sponsored plan

summary plan description

When options are sold, the premiums received are taxed how?

taxed as capital gains if option expires unexercised

If you are a 1st time home buyer and you want to pull out money from your IRA to help buy/rebuild/build your first home... how will you be taxed on the distribution?

taxed as ordinary income but won't be subject to penalty 10% tax on up to $10,000 of distributions

If you want to adopt a child / you are giving birth and you are age 36 and you want to pull out from your IRA to help cover costs.. how will you be taxed?

taxed as ordinary income dont have a tax penalty for withdrawals up to $5k

analysis focusing non market trends, charts, and market patterns in an attempt to predict the direction of a company's stock price

technical analysis

Interest in property that can be held only between a husband and wife in which each party has a right of survivorship over the property and which neither party can terminate without the consent of the other

tenants by entirety

upon death of one of the individuals involved, that person's interest in the account passes to his or her estate and not to the surviving member of the account

tenants in common

establishes a trust used to transfer an estate to beneficiaries after the death of the testator (person who created the will)

testamentary or traditional will

trust created from a will

testamentary will

who is responsible for termination notification in a state registered IA firm?

the IA is responsible for notification

who is responsible for termination notification in a federal registered investment advisor firm?

the IAR is responsible for notification

if an agent begins/terminates connection with a BD/Issuer or begins/terminates agent activities, the Agent/BD/Issuer must notify who

the administrator

who is responsible for ensuring that agents are registered

the agent's BD

life insurance death benefits may be subject to the federal estate tax if

the estate exceeds the excludable amount and the decedent(person who died) owned the life insurance policy

yield to call on a bond = the expected yield that the investor will receive, assuming that the bond is called on ______________

the first or next available call date

Unconsolidated Subsidiary - Parent company's financial statement would carry the unconsolidated subsidiary's gains and losses as an investment and would be found in ___________________________

the footnotes of the parent's balance sheet

IRR - for purposes of the equation, the inflows of the investment are assumed to be reinvested at __________

the investment's IRR

what would be the time horizon for their retirement investments?

the life expectancy of a retiring individual

DCF valuation approach - estimates the value of a security as ___________________________

the present value of all future cash flows that the investor expects to receive from the security

advertisements may not refer to past recommendations if the advertisement refers to specific recommendations that were profitable unlesss the adviser offers to furnish a list of all recs made within _____________

the previous year

in an attempt to end an inflationary period, the Federal reserve would do what ?

tighten money supply sell government securities raise the discount rate

bonds trading at a par will always have a basis (YTM) which is ____________ the coupon rate

the same as

An investor who is interested in purchasing a bond would use current yield as a means to calculate what?

their actual return would be if they purchased the bond at the current market price (whether at a discount or at a premium)

income/revenues are taxed to each limited partner in a limited partnership based on _______________

their share of ownership and the type of income/gain/loss

equity indexed annuities spread/margin/asset fee The fee is 4% of any gains to the index. If the index goes up by 10%, then the equity indexed annuity

then annuity is credited with 6% while remaining 4% goes toward fees

NASAA Rules and Custody - Would NOT constitute custody: funds inadvertently sent to the IA as long as ___________________

they are returned promptly within 3 business days

when the price of a bond declines, what happens to the current yield and basis?

they both rise

Do ETFs pay dividends?

they can but its not usual

under the 1933 act are listed securities exempt or do they have to be registered?

they must be registered

when there is a devaluation of cash assets, what happens to precious metal prices?

they rise

Why are Brady Bonds issued?

to convert defaulted loans into bonds and thereby reschedule the issuer's debt repayments Ex: had Latin American countries with bond deals due for repayments but didnt have money to pay for them so issue new Brady bonds and to make ppl more comfortable buying them they were backed by US Treasury zero-coupon bonds

investment objective = protection - what should they invest in?

to protect long stock position, buy put options to protect short stock position, buy calls

inflationary period

too much money chasing too few good = rising prices and rising interest rates

cost-to-equity ratio equation

total annual costs/ account's average balance

an investment's performance is best measured by what?

total return

turnover ratio equation

total value of annual purchases made in an account/ account's average monthly balance

in structuring a CMO the issuer distributes the cash flow coming in from the mortgages to a series of different classes of short, medium, and long-term maturities of the CMO which are called __________

tranches

cancel old certificates and issue new ones

transfer agents

HSAs have (single/double/triple) tax benefits?

triple

arrangement in which property is managed by one person for the benefit of another

trust

blank check, blind pool, shell company

typically have no stated investment objective/no intended investments upon formation

subsidiary for a company whose financial statements are accounted for "separately" from its parent company

unconsolidated subsidiary

any person (such as BD) who has purchased from an issuer or sells for an issuer in connection with a distribution of any security

underwriter

group of 2 or more individuals who voluntarily enter into an agreement to form an organization for a common purpose

unincorporated association

How often does an IA need to deliver a privacy policy to a client

upon the IA's engagement by a client and on an annual basis thereafter

alpha is calculated using what to account for the volatility

using Beta

life insurance installment payments are taxed how?

usually have a taxable interest element

Value investors focus on ________ - do they pay dividends? - do they have high or low price/book ratios? - do they have debt?

value stocks which are undervalued companies with low P/E Ratios pay regular dividends have low price/book ratios have little or no debt

This type of life insurance policy has an investment component which allows the policyholder to allocate a portion of the premium paid into an investment fund of stocks, bonds, mutual funds, and other types of investments

variable life insurance

do fixed or variable annuities offer a minimum death benefit?

variable offer a minimum death benefit

type of permanent life insurance that has an investment component which allows policyholder to allocate a portion of the premium paid into an investment fund of stocks, bonds, mutual funds and other types of investments

variable universal life insurance

investor buys life insurance policy from a policyholder with a terminal disease with a life expectancy of less than 2 years at a substantial discount from the DB

vatical settlement agreement

Client objective is speculation what should they invest in?

volatile common stocks, junk bonds, stock options

effecting, alone or with more persons, a series of transactions in any security creating actual or apparent active trading for the purpose of inducing sale of securities by others

wash sales/ matched orders

weak version of EMH semi-strong version of EMH strong version of EMH

weak= mkt prices reflect past prices and trading volumes so HIGHLY unlikely that investors will be able to outperform the market semi-strong = publicly available info is reflected in mkt prices strong = all information, public or private, is reflected in market prices

expected return is the _________________ for all components of the portfolio

weighted average of the expected annual returns

when does registration become effective?

when determined by the administrator but if there are no problems, then the application will automatically effective at noon on the 30th day after filing

registration through qualification becomes effective when?

when the Administrator so orders

annuity payout option in single life or life annuity, what happens when the annuitant dies? are there beneficiaries?

when the annuitant dies, the insurance company keeps any remaining balance and there are no beneficiaries

when does a state registration become effective when it is satisfied through coordination?

when the federal registration becomes effective

when will a BD or an IA not be required to post a surety bond

when they meet minimum net capital requirements or if they deposit cash or securities with the administrator instead

In a Front-end sales load when does the investor pay?

when they purchase the shares

in a back-end or deferred sales load when do investors pay?

when they redeem shares

If you're a federal covered advisor and registered with the SEC when do you have to file a notice with states?

when you have 6 or more clients in that state that you are transacting business with

executor - distributes assets either according to

will ("testate") or state's statutes

low volatility = client investment objective

willing to accept lower than expected market returns in order to have less unpredictability in their investments - bonds, and money market securities - avoid common stocks and equity securities

Investment advisers cannot exercise any discretionary power in placing orders without authority from a client when?

within 10 business days AFTER the first transaction

form of compensation where a client no longer pays fees for specific services, such as commissions on trades, or fees for specific financial advice Instead, the client typically pays a set % of AUM for agreed upon services

wrap fee

Can ETFs be sold short?

yes

what type of bonds are most sensitive to changes in interest rates?

zero coupon bonds because interest payments accumulate and compound at the bonds stated yield vs. bonds that pay semi-annually

are predictionns and projections allowed on Variable annuities?

no

are proxy statements considered solicitations? (definition for investment company shares)

no

are purported gifts bona fide gifts?

no

are reports to shareholders considered solicitations>

no

are shares acquired as a result of a merger or reorganization considered a sale?

no

can members of the UW syndicate pay by installment payments for new issues?

no

can personnel working in a BD's research dept be compensated by firms IB dept?

no

is a stock dividend considered a sale?

no

annuity payout option Annuitants receive regular income payments until they die, regardless of how long they live

single life or life

Per stirpes and per capita in will how are shares split

stirpes : unequal per capita : equal

income statement -> what are dividends on common stocks subtracted from?

Net Earnings

Reasons a company would repurchase their own stock

1 increase EPS 2 finance future acquisitions 3 provide stock for employee stock option plans 4 fight a takeover

if a quote for an investment company shares is (higher/lower) than NAV, the fund has to be a closed-end fund

lower because open end shares are priced at NAV+sales load

Rights of Accumulation explanation/formula=

lower sales charge when tot val of already held shrs + additional amt 2 be invested > sales charge breakpoint

Social Security - benefits are skewed in favor of who>

lower-paid workers

Tbills are in minimum denominations of

$100

The (higher/lower) the IRR, the better the investment

higher the IRR

cash flow statement is categorized into 3 categories:

1. Operations 2. Investing 3. Financing

changing the discount rate: rate charged to member banks which borrow from the Fed to cover temporary reserve needs rate is __________ to stimulate the economy

lowered

example of the time horizon for a child's college fund

number of years until a child FINISHES college

list or log generally of activity which takes place in the branch office of a BD

Blotter or Daily Blotter

an agent may not lawfully offer to sell securities in a ____________ underwriting.

pending. an offer cannot be made until the registration becomes "effective"

which statement is also called the profit and loss statement?

income statement

floating exchange rate is determined by

intervention of central banks and market forces

dividends are normally paid to investors how often?

quarterly

If your spouse dies, you are eligible for a _____________- benefit of social security

survivor

what are the 4 basic elements of an investment contract (which is defined under USA as a security)

1 investment of money 2 a common enterprise 3 expectation of profits 4 management by a 3rd party HOWEY DECISION

lagging indicators - tend to lag behind the economy

1 inventory 2 labor costs 3 existing housing sales 4 capital spending 5 outstanding commercial and industrial loans 6 unemployment rate 7 bank interest rates (prime rate) 8 corporate profits

Institutional Investment Managers managing an account with a value of more than ____________ in securities must file quarterly reports with the SEC

$100 mill

Bonds are issued in increments of _____

$1000

Coverdell EDU Savings Accounts - Total Contributions for an individual beneficiary of this type of account cannot be more than _____________, no matte how many accounts have been established - contributions can be made till when? - assets in account have to be distributed or transferred when? - what happens if not distributed? - Are contributions tax-deductible? paid with what dollars? - How are withdrawals taxed? - what can the benefits be used for?

$2000 aggregate / year - can be made till 18 - distributed or transferred within 30 days of age 30 - 10% penalty tax if not - contributions are NOT deductible, paid with after-tax $ - withdrawals are tax-free for qualified higher edu expenses and qualified elementary and secondary edu expenses Public and Private

General Partnership - how many partners? - how do they share the management, profits or losses, and liabilities of partnership? - offer continuous existence (limited life)? - can you transfer ownership? - startup capital is limited to ___________ - general partners are active or inactive in management and control of bus? - what type of liability?

- 2 or more - jointly - NOT offer continuous existence - can transfer if approved by all general partners - amount put in by each partner - active - unlimited personal liability for any company debts, taxes, or legal liabilities (entire net worth is at risk)

Margin Account - who sets the requirement on new purchases and on short sales in a margin account? - what Regulation requirement is on new purchases and short sales in a margin account? - what is the requirement %?

- Federal Reserve Board sets Reg T requirement on new purchases and on short sales which is 50%

- exchange is ___________ where buyers and sellers meet to execute trades. - _______________ is the key individual on an exchange trading floor. Person who trades securities - securities that trade on an exchange are considered ___________

- exchange = auction market - designated market maker (DMM) - "listed"

if the owner of an IRA dies and the designated beneficiary is: surviving spouse then the - transfer qualifies for what tax deduction? - can the spouse become an owner of the account? - can the spouse make contributions? - can the spouse rollover the inherited IRA? - Does the spouse have to pay taxes on the distribution?

- federal estate tax marital deduction - can become owner - can make contributions - can rollover - have to pay taxes on distribution

program trading - applies to __________________ - process of electronic execution of trading of a basket of stocks simultaneously for _____________, _______________, or _______________ (NASDAQ).

- applies to stocks and to derivative products - index arbitrage, portfolio restructuring, or outright buy/sell interests

ST Cap gains - taxed at what rate? tax liability =

- at investor's ordinary income tax rate = net ST Gain x Investor's marginal tax rate

trust - who drafts trust documents? - security? - trust files what form with IRS? - beneficiaries who receive income from a trust or estate receive what form from the trust or estate for tax reporting purposes? - do assets have to go through probate?

- attorneys NOT IAs - trust file Form 1041 - beneficiaries file Form K-1 - avoid probate

Class B shares - what type of sales load? - do they provide breakpoints? - how do their expense fees compare to other classes?

- back end loaded funds with contingent deferred sales load and is charged on a declining scale so the longer you own shares, the lower the load will be - NO - expense charges are higher than Class A

Short sale - sale of stock by a customer who has __________ - generally expects market price of stock to ________ - what accounts can short selling be conducted in?

- borrowed stock from BD - decline - only margin account

profit sharing plan - determination to contribute determined by who? - size of any annual contributions made by who? - contribution is dependent on what? - all funds are taxed how? - are deductible allowances allowed to be carried over to the next tax plan year?

- both determined by the employer - tax-sheltered - NO

joint account - signatures of who? required to open - who can enter orders? - distributions payable to who? - all taxable events are reported under whose SSN?

- both signatures - either party - payable to both - under 1 SSN

Financial Futures If you thought the market was about to rise, what would you do?

- buy/long stock index futures

definitions related to brochure rule contract for impersonal advisory services: any contract relating solely to the provision of IA services:

- by means of written or oral statements which do not purport to meet the objectives or needs of specific individuals or accounts - through the issuance of statistical information containing no expression of opinion as to the investment merits of a particular security or a combo

leveraged ETFs characteristics

- track an index fund or a benchmark - borrow capital with the goal of generating a greater percentage return - use derivatives such as futures and options - bc of leverage % gains or losses would be magnified

Capital Gains Distributions Investment Company - how can the investors receive these distributions? - Are capital gains taxable to the investor? - when are they paid out to the investor? - What happens to the NAV of the fund when these are paid out? - If reinvested, how are they reinvested? - Can these be used to offset other capital losses? - Is appreciation in the value of the portfolio taxable?

- can receive in form of cash or shares - taxable to investor EACH YEAR regardless of how they are taken - must be paid out 100% to investor, at least 1x a year - when paid, reduce the NAV of the fund - Reinvested at the NAV of the fund & no sales load will be charged - appreciation in the value of the portfolio is NOT TAXABLE

ETFs - _____________ are charged on transactions - do ETFs have a sales load?

- commissions are charged just like common stock - no sales load, which generally lowers costs to investors

SEP IRA - simplified employee pension - contributions are or are not tax deductible? - distributions and earnings are taxed how? - withdrawals taken before age 59.5 have what?

- contiribs are tax deductible - distributions and earnings are tax deferred until the owner retires then they are taxed as ordinary income - 10% penalty tax

Non-Qualified Deferred Compensation Plan - what type of plan is this? - frequently used by who? - subject to ERISA? - who is making contributions? - can employer offer to some and not to others? - can benefits be forfeited ever? - does an employee have a right to the asset of the plan? - what happens if the business fails? - can these be indexed to inflation? - are income taxes taken every year?

- contractual agreement between 2 parties - highly paid athletes and executives - employer isn't making contributions and neither is employee really - yes, employer can discriminate and only offer to highly paid execs - yes benefits can be forfeited under conditions of contract - NO no right to any asset until retirement, disability, or death - if business fails, could lose all benefits because the plan assets could be entitled to the company's creditors - employee becomes a general creditor if the company fails - can be indexed to inflation - income taxes are deferred until receipt

"C" Corporation - created how? - do shareholders have voting rights? - pay dividends? - can own real property? - can be general partners in investments? - can enter into contracts as a business entity? - subject to Alternative Minimum Tax per the Jobs Act? - Shareholders have what type of liability? - have ____________ existence? - are fringe benefits deductible? - can net capital losses be carried forward to offset capital gains? - what type of taxation?

- created by filing charter with the state - yes voting rights - can but dont have to pay dividends - can own voting rights - can be general partners in investments - can enter into contracts as a business entity - NOT subject to Alternative Minimum Tax per the Jobs Act - limited liability only liable for amount invested - perpetual existence (unlimited life) - yes and are greater - yes for up to 5 years - double taxation

participation rates - if index sees gains what happens? - if index sees loss what happens?

- credited with the gains at a given participation rate - do not participate in the losses

Forward Contract - __________ contract provisions - Terms __________ by parties - Price established by ________ - Deposit required? - Allowed to offset provisions? - Performance guaranteed? - regulated? - settled by what? - expect to take delivery? - daily valuation?

- customized contract provisions - terms negotiated by parties - price established by parties - NO deposit required - CANNOT offset provisions - performance NOT guaranteed - unregulated - settled by delivery - expect to take delivery - NO daily valuation

457 B - what type of plan? - designed for who? - who can contribute to plan? - how are contributions taxed? - earnings on the retirement money is taxed how?

- deferred compensation plan - for employees of state or local government or tax-exempt organizations - employers or employees can contribute through salary reductions - diff rules apply to Gov vs Non-Gov Plans - contribs are tax deferred - earnings are tax deferred

inertial inflation - what would a demand shock result from? - what would a supply shock result from?

- demand -> aggregate demand which is the sum total of national demand for goods and services, outstripping national supply (demand-pull inflation) - supply -> rising material costs or LT wage and price contracts pushing up prices (cost-pull inflation)

Traditional IRA - designed for who? - contributions to the account are taxed how? - how often can contributions be made when? - contributions can be made up to _______________ not to exceed certain limits - catch-up allowed? - are you allowed to contribute the limit of an IRA into an IRA and the limit of a Roth IRA into the Roth? - what happens if contributions are over the limits and are not removed from the account? - can contributions be made in cash? securities? both? - contributions can be made up to when? - is there an age limit on making contributions to an IRA?

- designed for employed individuals - contribs = tax deductible , annually, up to 100% of earned income - catch-up allowed for ppl age 50 and up - NO, because the Traditional and Roth IRAs are aggregated and cannot exceed limits - 6% excise tax for contribs over the limit - must be made in cash - up to April 15th of the year following the year that a deduction is claimed - no age limit per the Secure Act of 2019

Non-Traditional ETFs - most are designed for what type of trading objectives? - designed for what type of investors? - FINRA believes that these are unsuitable for who?

- designed for short-term trading obj - sophisticated investors - unsuitable for retail investors who plan to hold them for longer than 1 day

501 C 3 Entities - do they have to pay taxes? - what type of entities are they?

- dont pay federal income tax - non-profit organizations

defined contribution plans - who can make contributions? - how are benefits determined?

- employers and employees or both make contributions to employees' individual accounts - employers can make matching and profit sharing contributions to employee's accounts which are fixed by a predetermined formula - determined one the amount of contributions and the performance of investments inn the account

a stop loss order is an order entered to ________________ if the price of the security moves ____________ when you have a (profitable/loss) position

- entered to "unwind" a position (either buy or sell) - if moves against you when already have a PROFITABLE position

SS, Medicare, Unemployment taxes - what type of tax are these - what are they levied to pay for? - are they deducted? - what if income taxes are deferred, are they still deducted?

- federal payroll taxes - pay for social programs and unemployment - deducted from individual's paycheck - even when income taxes are deferred for various tax-qualified retirement plans, they are deducted from an individual's paycheck - even if your plan is tax-deferred you still have to pay these taxes

closed-end investment comapnies - How often are shares issued? - how do they trade? - how is the market price of a closed-end investment company's shares related to the NAV?

- fixed amount of shares issued once - secondary mkt like common stock - it is unrelated to NAV

Variable Life Insurance - fixed or variable level of premium? - fixed or adjustable DB? - cash surrender value based on what? is there a guaranteed rate? how often is it calculated? - do policyholders choose the investments/ bear investment risk? - is this a security? does it need a prospectus? - how can lapsed policies be reinstated?

- fixed level of premium that go into a Separate account - Variable DB - CSV based on performance of investments chosen by policy holder. Usually a guaranteed minimum DB. calculated at least monthly. - yes - policyholders bear investment risk - yes a security - yes needs a prospectus before or with the offer to sell - delivery of initial summary prospectus to new investors if a full prospectus is available online - updating summary prospectus if already own variable contract - reinstated w/ evidence of insurability and payment of unpaid premiums

whole life insurance - fixed or variable level of premium? - fixed or variable DB? - cash surrender value? - do policyholders choose the investments/ bear investment risk? - how can lapsed policies be reinstated?

- fixed level premium - fixed DB - yes CSV value is increased based on a fixed cash value table or schedule - policyholders do NOT choose investments - reinstated with evidence of insurability and payment of unpaid premiums

universal life or adjustable life insurance - fixed or variable level of premium? - fixed or adjustable DB? - cash surrender value based on what? is there a guaranteed rate? - do policyholders choose the investments/ bear investment risk? - how can lapsed policies be reinstated?

- flexible level of premium into a general account - adjustable DB - cash surrender value based on fluctuating interest rates but there is a minimum guaranteed rate - policyholders do not choose investments - reinstated with evidence of insurability and payment of unpaid premiums

IRA Rollovers - Rollovers to or from what are permitted ? - individual has ___________ to invest benefits from a retirement plan into the new account before incurring a tax liability - Are rollovers tax free?

- from another IRA, Keogh, or qualified plan are allowed - 60 days - Tax-free rollovers are limited to 1x every 12 months if rollover is IRA-IRA rollover

Valuation on modern indexed annuities Annual reset: - what time period? - how is it valued for the annuitant?

- from beginning of year to end of year - annuitant locks in gains every year that the index is positive

Social Security - funded from what? which applies to wages up to __________ - Tax rate is __________ of which _______ is paid by the employer and _________ is paid by the employee - earliest age at which a retiree can elect to receive benefits is __________ . What happens if they elect to receive benefits at earliest age? - Full benefits can be received by the retiree at age ____, _____, or ________ depending on ___________ of the retiree. - Retiree can elect to delay benefits until age _______. If so, benefits will increase ___________ how often?

- funded from Federal Payroll Tax - wages up to $137,700 (2020) - Tax rate is 12.4%, 50% paid by employer, 50% paid by employee - earliest = 62, then will reduce benefits - 65, 66, 67, depending on date of birth of retiree - retiree can delay till age 70. benefits will increase 8% annually each year that benefits are delayed and will stop increasing when the retiree reaches 70 years

- You are a soybean farmer in Iowa and want to protect yourself against price moves what should you do? - Cattle-feed manufacturer says he wants to buy all beans from you in 2 months when they are ready for harvest what agreement would that be?

- futures contract to protect against price movements - forward contract

Limited Partnership - general partners: role? liability? - limited partners: role? liability? - greatest risk in investing in an LP =

- general = sponsor/ manager, manage the entity, active partners, unlimited personal liability - limited = provide capital, do not manage, passive partners, limit their liability to their initial contribution + any unpaid contributions they agreed to in partnership agreement - greatest risk = lack of liquidity

Prepaid or EDU savings plan P/E 529 plan - hedge against increased tuition costs - available for all levels of edu - value based on performance of investments chosen by account holder/owner - account owner bears investment risk - typically charge enrollment and admin fees - charge enrollment fees, annual maintenance fees, and asset management fees - qualified withdrawals are tax free - higher returns - lock in cost of specific # of academic periods at current prices - offering circular is delivered to potential investors - earnings accumulate tax free - composed of mutual funds

- hedge against increased tuition costs Prepaid - available for all levels of edu Prepaid and EDU - value based on performance of investments chosen by account holder/owner EDU - account owner bears investment risk EDU - typically charge enrollment and admin fees Prepaid - charge enrollment fees, annual maintenance fees, and asset management fees EDU - qualified withdrawals are tax free EDU - higher returns EDU - lock in cost of specific # of academic periods at current prices Prepaid - offering circular is delivered to potential investors EDU - earnings accumulate tax free EDU - composed of mutual funds EDU

US Balance of Payments Deficit Increases (worsens) Due to

- increase in US investments abroad - US tourists spending abroad - US loans to other countries - raising dividends and interest payments on foreign-owned securities of US issuers MONEY GOING OUT

HSAs - individual accounts or can be set up through employer? - established as savings account? established as investment account? - withdrawals before age ___________ for non-health purposes will result in what taxes? + a ___________ penalty tax. - withdrawals after age ___________ for non-health purposes will result in what taxes? + a ___________ penalty tax.

- individual NOT employer not FSA - savings or investment acct - before 65 = ordinary income tax + 20% penalty - after 65 = ordinary income tax + 0% penalty

Real estate investment trusts (REITs) - invest in LT mortgages? - own property? - provide investors with depreciation write-offs? - make ST real estate construction and development loans? - pass through losses to investors? - redeemable? - invest in other REITs? - are investment companies? - issue debt? - require minimum investment? - regulated under Investment Company Act of 1940? - Offer limited liability? - are direct participation programs? - are exempt from registration from SEC? - offer professional asset management? - offer liquidity? - offer possible share appreciation?

- invest in LT mortgages? YES - own property? YES - provide investors with depreciation write-offs? NO - make ST real estate construction and development loans? YES - pass through losses to investors? NO - redeemable? NO - invest in other REITs? YES - are investment companies? NO - issue debt? YES - require minimum investment? NO - regulated under Investment Company Act of 1940? NO - Offer limited liability? YES - are direct participation programs? NO - are exempt from registration from SEC? NO - offer professional asset management? YES - offer liquidity? YES - offer possible share appreciation? YES

individual taxpayers may deduct charitable contributions of money or property made to qualified organizations if the taxpayer has _________________ - _______________ is allowed for Public Foundations - ________________ for all cash donations for public foundations - ______________ is allowed for Private Foundations

- itemized tax return - Public: up to 50% of adjusted gross income - Cash Public: up to 60% of adjusted gross income - Private: up to 30% of AGI

vatical settlement agreement - buys from policyholder w/ terminal disease = life expectancy of ______________ - at the time of the trans, purchase price of policy will be (more than/less than) cash value but (more than/less than) the DB, therefore (both/policyholder/investor) benefit. - ___________________ continues to pay the premiums - ________________ becomes the beneficiary and collects DB

- less than 2 yrs - at the time of the trans, purchase price of policy will be more than cash value but less than the DB, therefore both benefit. - investor pays premiums - investor = beneficiary

Which assets are not eligible for a TOD - limited partnership interests - mutual funds - variable annuities - fixed annuities - stocks - bonds - precious metals - commodities

- limited partnership interests - variable annuities - fixed annuities - precious metals - commodities

Taxable Termination - original trust transfer made to how many ppl? - income is first paid to child of grantor (who is the ________ person) for life, and any remainder is paid to the grantor's grandchild (who is the ____________ person) - in this situation the tax is imposed when - for example, at the point when the property will pass to the skip-person, tax would be applicable when?

- made to more than 1 person , 1 skip-person and 1 non-skip-person - child = non-skip-person - grandchild = skip person - tax imposed upon date of termination of last remaining interest held by non-skip-person - applicable upon the death of the grantor's child (the non-skip-person)

included in annual fund operating expenses are - - - - - -

- management fees - distribution and or service fees (12b-1) - custodial fees - legal expenses - accounting expenses - administration expenses and transfer agent expenses

Qualified Domestic Relations Order (QDRO) must contain certain information: - name and last known address of the plan participant and each alternative payee? - plan to provide an alternate payee or participant with any type of benefit prohibited by the plan - plan to provide for increased benefits - name of each plan to which the order applies - dollar amount or percentage of benefit to be paid to the alternative payee - number of payments or time period to which order applies

- name and last known address of the plan participant and each alternative payee? - name of each plan to which the order applies - dollar amount or percentage of benefit to be paid to the alternative payee - number of payments or time period to which order applies

Qualified Investors are defined as having - net worth of ___________ or - _____________ in assets invested under the specific investment manager

- net worth of $2.2 Mill - $1.1 Mill in assets

US Balance of Payments Deficit Improves Due To

- new foreign investments in US - commodity exports - spending by foreign tourists in the US - repayment of loans paid to US - increased dividends and interest earned on foreign investments MONEY COMING IN

if an individual has health coverage, can they set up an HSA? - what do ppl need to be enrolled in in order to set up an HSA

- no - high-deductible health plan (HDHP)

direct investing precious metals - income potential? - capital gain or loss potential? - can be purchased by an investor in a brokerage or retirement account? - storage costs/insurance costs? - what is paid to the seller when buy these?

- no income potential - yes capital gain/loss potential - yes brokerage and retirement account - yes storage costs and insurance costs - current "spot" or cash prices + mark-up

Class C shares - what type of sales load? - do they provide breakpoints? - how do their expense fees compare to other classes?

- no upfront and no back end load - no - HIGHEST expense charges

Market Linked Notes (MLNs) - debt securities that have a return linked to the performance of another asset or assets and can include?

- not limited to equities - can include commodities, futures, foreign currencies, equities, and international markets

Policy loans/premiums - taxable? - have to repay them? - what happens if have a loan when die?

- not taxable - must be repaid with interest - loans are subtracted from death benefits if unpaid

Short put - right or obligation if exercise? - Profit potential? - loss potential? - max loss?

- obligation to buy stock if exercised - limited profit= premium - limited loss - max loss = strike price - premium

short calls - right or obligation if exercise? - Profit potential? - loss potential? - max loss?

- obligation to sell if exercised - limited profit= premium - limited loss if covered - unlimited loss if uncovered

Can ETNs be sold short? How do ETNs trade? Are ETNs callable? Do ETNs have a maturity date?

- trade like a stock and - CAN be sold short - can be callable - have a final maturity date

CMOs risks: 1. 2.

1. Implied risk - that principal will be returned sooner than expected 2. extension risk - risk that life of security may be longer than anticipated

Uniform Gifts to Minors Act Uniform Transfer to Minors Act - allow opening of __________ for a minor - used to transfer _______________ to a minor upon when? - need an attorney? - donor must be how old? - limit on size of gift? - does gift tax apply? - whose SSN is used for account? - can margin accounts or short-selling be used? - can this effect a child receiving special aid? - tax benefit potential? - how many custodians per account? - how many minors per account?

- opening of securities account - transfer securities or cash to minor upon reaching legal age - no attorney needed - donor must be adult - no limit on gift size - gift tax could apply - use minors SSN - no margin acts or short selling - YES could disqualify them from financial aid so should use a 529 plan instead - tax benefit potential bc minor may be in a lower tax bracket - 1 custodian - 1 minor

ordinary income - subject to what tax treatment by IRS? - how is it taxed? - taxed at what rate? - includes: 1. 2. 3.

- ordinary tax treatment - fully taxable 1. wages 2. interest 3. some dividends (non-qualified dividends like divs on REITs and mutual funds not qualified bc they are only taxed at rate of 15%)

sole proprietorship - business owned by who? - simplest or hardest way to do business? - legal filings required? - start up / maintenance costs? - can losses be used to offset income for tax purposes? - what type of liability does owner have? - what tax do owners have to pay?

- owned by individual - simplest - DBA - Doing Business As for the use of a fictitious name - no or low start up and maintenance costs - losses can - unlimited personal liability - self-employment tax for themselves and any employees may have

LLC - owners = - ___________ existence - taxation? - shareholder restrictions? - interests freely transferable as corporate shares? - use of marketability? - use of minority discounts?

- owners = members - LIMITED existence - pass-through taxation, NOT double - NO restrictions - NO because consent of other members is required - use of marketability and minority discounts

types of federal income tax rates Marginal Tax Rate - tax rate that is paid on __________ - In the US, the progressive income tax causes the marginal rate to _______________

- paid on the LAST dollar that you make - progressive tax causes marginal rate to increase with increasing salaries

life insurance premium payments are generally paid with ____________ - if policyholder discontinues premium payments on a cash value policy, policyholder can elect to 1. 2.

- paid with after-tax $ 1. elect to receive a receive a reduced, paid-up policy OR 2. extended term insurance

S Corporation - taxation? - what type of liability? - have how many shareholders? - Is S Corp status available to large corporations? - Capital gains and losses on S Corps pass-through to shareholders as ___________ - have _________ existence

- pass through taxation NO double taxation - limited liability - 100 or fewer shareholders (used to be 75 or fewer) - not available - as shareholder capital gains and capital losses - perpetual existence -> unlimited life

indexing - actively or passively managed portfolio? - weighing a portfolio to mirror an index or to beat an index? - attempt to identify under and over valued securities?

- passively managed - mirror an index - NO

Forward contracts - what type of contracts? - are they traded? - used primarily by who?

- personal agreements between 2 parties - NOT traded - users or producers of commodities to hedge spot or cash price movements

Balance sheet can be constructed - period of time or point in time - used to create a _______ - used to calculate _________ - components: 1. 2. 3. Equation:

- point in time - create trend - calculate estate tax 1. assets 2. liabilities (debt) 3. Net Worth (Equity) Assets = Liabilities + Equity

When securities are acquired as a gift and: - sold at a profit, cost basis of ___________ is used - sold at a loss, cost basis of ____________ is used

- profit = cost basis of donor - loss = cost basis of securities at time of gift is used

types of federal income tax rates Income tax rate - a __________________ tax rate based on ____________________ - your tax rate (increases/decreases) as your income increases

- progressive tax rate based on the amount of $ you make in a given YEAR - increases

direct investments in real estate basic rental properties - income? - who is responsible for mortgage payments, taxes, and other costs of maintaining property?

- provide monthly rental income - investor

real estate investment trusts (REITs) - traded? - manage a portfolio of real estate assets in attempt to earn profit for who?

- publicly-traded companies - profit for shareholders

Keogh Plan - qualified or non qualified retirement plan? or IRA? - contributions are taxed how? - plan is for who? - can be set up as defined contribution plan? or defined benefit plan? - are Keoghs or SEPs more complex to set up? - do Keoghs or SEPs have higher contribution limits?

- qualified plan - tax-deferred - self-employed individuals and their full-time employees who meet requirements including partnerships, sole proprietorships, and unincorporated entities - can be set up for both - Keoghs are more complex to set up - Keoghs have higher contribution limits

Equity REITs - shareholders receive _______________ - REITs take _________

- receive income from rents received and capital gains when the property is sold at a profit - take equity positions in real estate

Mortgage REITs - shareholders receive _____________ - capital structure has large amount of ________________ - leveraged?

- receive interest income from loans taken out by building developers - debt - highly leveraged

long put option - right or obligation if exercise? - Profit potential? - loss potential? - max loss?

- right to "sell stock" if exercised - limited profit - limited loss - max loss = premium

Long Call - right or obligation if exercise? - Profit potential? - loss potential?

- right to buy stock if exercised - unlimited profit potential - limited loss potential - max loss = premium

direct investments in real estate Raw land - risky or safe investment? - income? - who makes mortgage payments? - who pays taxes and maintains property? - does depreciation apply to raw land? - liquid investment?

- risky - no income - owner - owner - no so dont get the depreciation tax deduction - illiquid

dark pools - run by who? - trade stock how? - execute at what price? - are orders executed reported? - are the number of shares bought or sold reported? - when trading, does the price of the stock being traded move?

- run by large investment banks and hedge funds for institutional investors - trade stock PRIVATELY and anonymously off the floor of an exchange - orders executed NOT reported - # of shares NOT reported - doesn't move the price of the stock being traded

equity indexed annuities interest rate caps - what happens if index sees gains? - what happens if sees losses?

- set cap is placed one the amount of appreciation of the index - index goes down, no fee

equity indexed annuities spread/margin/asset fees - if index sees gains? - if index sees losses?

- set fee is taken from any gains instead of a participation-rate-based equation - no fee is charged for losses

HSA - set-up with who? - who can contribute? - who can withdraw? - what can withdraw for? - are withdrawals taxed? - accounts can only be opened for ________

- set-up with a qualified HSA trustee like a bank or insurance company - individual taxpayers can contribute - individual taxpayers can withdraw - withdraw for certain medical, dental, and vision expenses - w/drawals = tax-free - for ppl who enroll in a high-deductible health plan (HDHP) and have no other health coverage or Medicare

Savings Incentive Match Plan for Employees (SIMPLE) - designed for who? - are contributions tax deductible to the contributor? - who is allowed to contribute? - similar to what type of plan?

- small business owners and their employee with only 100 or fewer employees - employer gets a tax deduction for contributions they make to the SIMPLE IRA - employees can make elective salary deferrals of their pre-tax compensation to the plan - similar to 401K

Simplified Employee Pension (SEP/SEP IRA) - plan designed for: - who can make contributions? - who owns the account? - are contributions tax deductible? for who? - are contributions fixed or variable over the years?

- small business owners and their employees - employers make contributions to personal IRA accounts of employees - employees can also make their own additional contributions to their accounts under the plan accordance with the Traditional IRA regs and limits - employees own and control the IRA - tax deductible for the employer - discretionary can be changed from year to year

Valuation on modern indexed annuities point-to-point - what time period? - how is it valued for the annuitant? - interest is credited at beginning or end of period? - what is the interest based on?

- some period - compares change of index at 1 point in time to another point in time - end of period - based on participation rate or cap rate of the annuitant

Valuation on modern indexed annuities high water mark: - what time period? - how is it valued for the annuitant?

- some period of time - takes high point of index and compares it to index value at the beginning of the period

income statement - point in time or period of time? - details what?

- specific period of time - revenues and expenses of client and shows net profit or loss

Futures Contract - __________ contract provisions - Specifications of contract mandated by who? - Price established by ________ - Deposit required? - Allowed to offset provisions? - Performance guaranteed? - regulated? - settled by what? - expect to take delivery? - daily valuation?

- standardized contract provisions - specifications mandated by exchanges - price established by open outcry in "pit" - Deposits (margin) required - traded on exchanges to offset - performance GUARANTEED by 3rd party - highly regulated - settled by delivery or cash - dont expect to take delivery - daily valuations for gains / losses

529 Savings Plan or Qualified Tuition Program - established and maintained by who? - contributions tax deductible for federal income tax purposes? - annual earnings taxed how? - qualified withdrawals taxed how? - how many students per account is allowed? - can one student have multiple accounts? - Who cam establish for student? - can the beneficiaries of the account be changed? by who? when? - assets can be transferred to ___________ How are they taxed? - who can make withdrawals from the account? - do you have to invest in plans from your own state?

- state government - NOT tax deductible - annual earnings and qualified withdrawals = tax free - 1 student/acct - 1 student can have multiple accts - anyone can establish - yes acct holder/owner can change beneficiary at any time AS LONG AS new beneficiary is a qualified member of the original beneficiary's family - transferred to another 529 Plan of the SAME beneficiary tax free 1x every 12 months - only owner can make withdrawals not beneficiary - no can invest in other states plans

SIMPLE IRA - how are distributions and earnings taxed? - if you are an employee and you have participated in your SIMPLE IRA for 1 year and want to withdraw, how will the withdrawal be taxed? - if you are an employee and you have participated in your SIMPLE IRA for 3 years and you are 58 and you want to withdraw how will that withdrawal be taxed?

- tax deferred until withdrawn then taxed at ordinary income tax rate - if take out in first 2 years that you participate, penalty tax = 25% - if take out after 2 years but before 59.5, penalty tax = 10%

403B/ TSA - used by who? - how does it provide its benefits? - 3 types of employers that qualify to offer a 403B = 1. 2. 3.

- tax-exempt or non-profit organizations - buys annuities or contributes to custodial accounts that are invested in mutual funds 1. public edu systems 2. certain 501 c 3 organizations like religions, edu, charities 3. certain employers of ministers

Partnerships - how is income taxed?

- taxed only once at the partner level since partnership itself is not a taxable entity - conduit/ flow through/ pass through taxation

Revocable Trust - the income of a revocable trust is taxed to the grantor how when the grantor is alive?

- taxed to the grantor at the grantor's tax rate

Traditional IRA - how are earnings taxed in an IRA?

- taxes on all earnings in the IRA are deferred until withdrawals are made

investment objective = growth - what should they invest in?

- technology stocks & sector funds for aggressive growth - blue chip and defensive stocks for moderate growth

Blotter or Daily Blotter - temporary or permanent record of activities? - BDs blotters will show: 1. 2. 3.

- temporary until transferred to permanent record book 1. purchase and sale transactions 2. cash receipts and disbursements 3. securities received and delivered

CMOs - how are they traded? - are interest payments subject to taxation? - what credit rating do they carry? - primary risks or concerns to investors (not including implied or extension risk)

- traded OTC in secondary market w/ markups and markdowns - interest payments = Federal and State income tax - AAA Rating - liquidity, average-life sensitivity, price sensitivity

Under USA a person is an individual or legal entity including:

- trusts - corporations - partnerships - associations - unincorporated orgs - governments NOT MINORS

Real estate investment trusts (REITs) - value based on what? - shares considered "derivatives"?

- underlying properties - NOT derivatives - REITs directly invest in real estate

Tax Filing Status Head of Household - what is a qualifying person and how long do they have to live with the taxpayer for them to be able to file under head of household?

- unmarried child, grandchild, or elderly parent that the taxpayer can claim as an exemption - live with them for over 6 months of the year

Class A shares - what type of sales load? - do they provide breakpoints? - how do their expense fees compare to other classes?

- upfront sales charge not exceeding 8.5% - only one that provide sales charge brkpt discount - LOWEST sales charge

cash surrender value - amount of cash available upon the ___________________ - policyholders can or cannot take out loans against the CSV? - the amount paid =

- voluntary termination of a policy if the policyholder surrenders or cancels the policy before it becomes payable by death - can take out loan - amount paid = cash value of policy - any surrender charge or - outstanding loan balance

equity indexed annuity traditional approach - are contract holders guaranteed a minimum value on their annuity? - if index increased in value, the contract holder would be - if index decreased in value, the contract holder would be - products were treated as _________

- yes - credited with at least part of the gain (cap to how much they would receive) - debited at least part of the decrease in value - securities

Simplified Employee Pension IRA - are employees vested in contributions made by employer? - can an employer make a contribution to 1 employee and not another? - employees are eligible to participate if: 1. they are how old? 2. They have worked for the employer for how long? 3. They have receives at least $_____________- in wages for what time period?

- yes 100% vested - NO if makes contribution, must make contributions to all employees who are eligible - they are 21 - worked for employer during at least 3 of the preceding 5 years - have received at least $600 in wages for the current tax year

if the owner of an IRA dies and the designated beneficiary is: stretching an IRA - do the beneficiaries enjoy any tax deferred growth? - what act abolished this option? - Are there required minimum withdrawals? - requires beneficiary take out all assets in account when?

- yes tax-deferred growth - Secure Act of 2019 - no required minimum withdrawals - but entire balance must be distributed by the end of the 10th year

Correlation Coefficient =.. Minus 1 or -1 means ____________ Plus 1 or +1 means ______________ 0 means _________________

-1 = perfectly negatively correlated to the benchmark +1= perfectly positively correlated to the benchmark 0= no relationship

Under FINRA rules, for a mutual fund paying marketing and distribution expenses cannot exceed _______ of the fund's average net assets per year

0.75%

if Fed Reserve is purchasing government issues, it causes:

1 Bank deposits to increase 2 Bank reserves to increase

order ticket for a securities transaction must include

1 act # 2 time order is received 3 agent on acct 4 terms and conditions of order

people excluded from the term BD

1 agents 2 issuers 3 banks, savings institutions, trust companies 4 person who has no place of bus in state and only effects trans with or through financial institutions

to be entitled to the dividend, you must own the stock at least _________

1 bus day before the ex div date

Form CRS (BDs) and Form ADV Pt 3 (IAs) have to have an explanation or description of the following

1 firm's services 2 fees and costs 3 conflicts of interest 4 disciplinary history of financial professionals 5 link to the SEC's investor education website, Investor.gov

following investment products are specifically excluded from the definition of a security

1 fixed life insurance policies 2 endowment policies 3 fixed annuity contracts 4 commodity futures contracts 5 collectibles. including antiques 6 precious metals 7 real estate

Leading Economic Indicators - tend to forecast the future of the economy

1 production worker's average workweek 2 new housing starts 3 new business formation 4 money supply M2 5 vendor performance 6 new orders for durable goods - goods that have a life of 3 or more years 7 stock prices 8 contracts and orders for equipment 9 index of consumer expectations 10 unemployment claims 11 unfilled orders for durable goods

ST Capital Gain = Cap gains where security held for how long?

1 year or less

negotiable CDs have fixed maturities of how long?

1 year or less

Registration is denied to any person who has spent _____________ in prison

1 year or more

IRS Rule = __________ waiting period for IRA rollovers

1 year waiting period - can't make another rollover from same IRA within 1 yr if already did it

Exemptions per Dodd Frank Act: Exempt Reporting Advisers are IAs that qualify for the exemption from registration because they are an adviser solely to:

1) 1 or more venture capital funds, or 2) small private funds w/ AUM<$150 million

2 categories of private funds which are excluded from the definition of an investment company under the Invstmt Comp Act of 1940, and therefore, do not have to register with the SEC and are exempt from the reporting requirements of the Secs Act of 1934:

1) 100 investors max, not making public offering - investors must be Accredited Investors 2) over 100 investors, but typically limited to 499 investors, not making a public offering - investors must be Qualified Purchasers

"investment counsel" may not be used by an IA registered at the federal level unless both of the following are met

1) Adviser's principal business = IA 2) over 50% of IA's business consists of providing investment supervisory services

Qualified Distribution in an IRA 1. AND 2.

1. 5 year holding period - distribution can't be made before the end of the 5th year after which the individ made their initial contrib to the Roth IRA AND 2. must meet 1: - after Roth owner = 59.5 - as result of death or disability of Roth Owner - for qualified 1st time home buyer expenses - for edu expenses - for medical insurance premiums

Shareholder Fees of Mutual Fund Fees and Expenses include: 1. 2. 3. 4. 5. 6. 7.

1. Annual Fund Operating Expenses 2. Sales Load 3. No-Load Fund 4. Redemption Fee 5. Exchange Fee 6. Account Fee 7. Purchase Fee

A registration statement for a security must be filed with the SEC for review and must include the names and addresses of 1. 2. 3. anyone who owns more than _____________ of the issuer's stock

1. CEO, CFO, and CAO 2. Underwriter of issuer 3. more than 10%

key characterstics of Brady bonds:

1. Coupon bearing bonds with fixed or variable interest rates that mature in 10-30 years 2. Secured by US Treasury Zero Coupon bonds

To calculate the DCF of a bond, the investor must know the*****

1. Coupon payment amounts 2. final principal payment at maturity 3. Discount rate

categories of return 1. 2. 3.

1. Income - dividends and interest paid to investors 2. Realized Capital Gains - when investor realizes profit aka sells security 3. Real returns - total returns (income + realized capital gains) adjusted for inflationn

customer confirmations must be sent at or before completion of a transaction and must include: 1 2. 3. 4. 5. 6. 7. 8.

1. Date & Time of a transaction 2. Identification of the security 3. Price of the security 4. # of shares 5. principal amount if its a bond/debt security 6. whether BD acted as an agent or principal 7. yield to maturity calculated from the dollar price 8. yield at which the trade was effected

"cost basis" of asset - key elements in determining= 1. 2. 3. 4.

1. Date acquired 2. original cost 3. adjustments/depreciation 4.owner

2 types of pension plans

1. Defined Benefit Plans 2. Defined Contribution Plans

403B/ TSA Annual Contributions can include: 1. 2. 3. - is any catch-up amount allowed?

1. Elective Salary Reduction contributions made by EMPLOYEE 2. Non-Elective contributions made by the EMPLOYER 3. After-tax contributions made by the EMPLOYEE - yes allowed at age 50

Types of REITs 1. 2. 3.

1. Equity REITs 2. Mortgage REITs 3. Hybrid REITs

semi-affluent investors can invest in certain types of hedge funds that are established as:

1. Funds of funds 2. Open-end funds

Derivatives: 1. 2. 3. 4. 5.

1. Futures & Forward Contracts 2. Options 3. Swaps 4. Rights 5. Warrants

CMO pools may be collateralized by: 1. 2. 3. 4. 5.

1. Ginnie Maes (GNMA) 2. Fannie Maws (FNMA) 3. Freddie Macs (FHML) 4. FHA Mortgage Loans 5. Conventional Mortgages

agency cross transactions by an IA may be permitted if: 1. 2. (a) (b) 3. 4. (a) (b)

1. IA is acting in best interest of advisory client regarding price 2. IA gets written consent from client that client understands that adviser (a) receives commissions from both parties & (b) potential exists for a conflict of interest 3. client gets written confirmation not later than completion of trans 4. if adviser sends both clients ANNUALLY a WRITTEN statement indentifying (a) total agency cross transactions in that period & (b) commissions received in that period

excluded from the definition of a federal covered advisor (Exempt from SEC registration)

1. IAs who give advice on US Gov Secs ONLY 2. Banks and Bank Holding Companies 3. Publishers of general advice about securities 4.. Lawyers, Accountants, Teachers, Engineers

Physical security and cybersecurity policies and procedures must cover at least 5 functions:

1. Identify 2. Protect 3. Detect 4. Respond 5. Recover

Can 403B Plans/ TSA Plans invest in: 1. Limited Partnerships? 2. Annuities? 3. Mutual Funds?

1. Limited Partnerships? NO 2. Annuities? YES 3. Mutual Funds? YES

An investor with a minimum required rate of return of 3% might be looking at buying a $1,000 bond with a 5% coupon that matures in 3 years. 1. What's the NPV of this bond? 2. If the market price of the bond is less than the NPV, what does this mean for our investor? will he achieve a rate of return higher/lower/equal to 3%? 3. If the market price of the bond is greater than the NPV, what does this mean for our investor? will he achieve a rate of return higher/lower/equal to 3%? 4. If the market price of the bond is equal to the NPV, what does this mean for our investor? will he achieve a rate of return higher/lower/equal to 3%?

1. NPV = Yr 1 PV: $50 coupon/ (1+.03)^1= $48.54 Yr 2 PV: $50 coupon/ (1+.03)^2= $47.13 Yr 3 PV: ($50 coupon+ $1,000 principal)/ (1+.03)^3= $960.90 $48.54+ $47.13+ $960.90 = $1,056.57 2. mkt price<NPV rate higher than 3% 3. mkt price>NPV rate lower than 3% 4. mkt price=NPV achieve min required Rate of Return of 3%

new account report forms Info must be included and confirmed:

1. Name 2. Contact info 3. Occupation, employer, business address 4. Citizenship 5. DOB 6. SSN or Tax ID # 7. Gov issued photo ID 8. numbered accounts require written statement attesting to ownership of the account

financial firms that transfer funds, including wire fund transfers of 3k or more_, must collect, retain, and record certain info:

1. Name and address of transmitter and recipient 2. recipient's financial institution, account number, and amount

DCF can be used to evaluate 1. 2. 3. 4. 5. 6.

1. Ongoing investments with no expected maturity 2. investments with an expected maturity 3. portfolios 5. Specific projects which have a completion date 5. Business ventures with no specifiec completion date 6. Investment managers

Cash fee may be paid to unaffiliated solicitors as long as solicitor: 1. 2. 3. Not later than _______________, the IA must receive a signed and dated acknowledgment from the client stating the client has received both: (a) (b)

1. Perform duties in manner consistent with adviser's instructions 2. deliver current copy of IA's disclosure statement & separate WRITTEN disclosure document of solicitor 3. no later than time a written or oral agreement is entered into, IA has to get a SIGNED AND DATED acknowledgment from client that received (a) adviser's written disclosure document (b) solicitor's written disclosure document

Money Laundering Stages

1. Placement: cash enters financial system 2. Layering: Funds moved into other accounts 3. Integration Stage: Funds reintroduced into economy

Basic characteristics of ELNs and MLNs 1. Are they allowed to be issued with a guarantee? 2. How do structured products pay interest payments? How specifically does MLNs pay interest and coupon payments? 3. How are they listed? 4. How are they issued? 5. What are the primary risks associated with them?

1. Principal Protection: Many structured products are issued with a guarantee of full or partial return of original investment if held to maturity, some issued without 2. Performance/ Return: Pay interest payments as ordinary notes do - performance or return of these products at maturity is tied to selected underlying security - some MLNs might not pay fixed interest payments or coupon because the value of the payment would be based on the performance of the underlying stock 3. Listing: some exchange-listed, some unlisted 4. Issuance: new offerings or in 2ndary misplace for listed 5. Risks: Principal Risk, Performance Risk, Liquidity Risk, Credit Risk, Call/Reinvestment Risk

Administrator may by order summarily deny or revoke any of the specified exemptions. Upon the entry of a summary order, the Administrator shall: Can an order to deny/revoke an exemption be made retroactively?

1. Promptly notify all interested parties that order = entered 2. provide reasons for the order 3. indicate that within 15 days of the written request, a hearing will be granted no

Income Statement 1st _________ 2nd ____________ 3rd ____________ 4th ____________________ 5th __________________ 6th __________________

1. Sales - COGS - Selling & Admin costs - depreciation 2. Operating Profit (EBIT) - Bond Interest 3. Total Income (EBT) - Taxes 4. Net Income (EAT) - Dividends on Preferred Stock 5. NET EARNINGS - Dividends on Common Stock 6. Retained Earnings

variable policies with separate accounts generally have deductions from premiums: 1. 2. 3.

1. Sales charge 2. premium tax charges 3. administration fees such as billing, record keeping, and communication with policyholders

To implement a tight money policy, the Fed would - all would decrease excess reserves

1. Sell treasury secs in open market 2. raise discount rate 3. raise reserve requirement of member banks

An Investment Advisor shall not enter into, extend, or renew any investment advisory contract unless IN WRITING and discloses:

1. Services to be provided 2. Term of contract 3. Advisory fee + differences in fees/discounts 4. Return fee amount in case of termination or non-performance 5. If discretionary power has been given 6. That no assignment of contract be made without client consent

Coverdell contributions are phased out for taxpayers : 1. Singles -> 2. Married couples joint filers ->

1. Singles btwn $95k - $110k 2. MFJ $190k - $220k

order of asset distribution upon liquidation of a corporation is:

1. Taxes 2. Secured debt (bonds backed by hard assets) 3. Unsecured debt (debentures, general creditors, accounts payable) 4. Preferred stockholders 5. Common stockholders

High Liquidity risk or Low Liquidity Risk (H/L) 1. Thinly-traded stocks 2. NYSE-listed common stock 3. REITs 4. real estate or land purchases 5. limited partnerships 6. money market securities

1. Thinly-traded stocks H 2. NYSE-listed common stock L 3. REITs L 4. real estate or land purchases H 5. limited partnerships H 6. money market securities L

low-risk and safe investment strategy include 1. 2. 3.

1. Treasury Securities 2. CDs 3. Money Market Funds

exempt securities under the '33 act 1. 2. 3. 4. 5. 6. 7. 8. 9. 1. 11. 12.

1. US Gov Secs 2. Muni Secs 3. Secs issued by nonprofit org 4. Regulation D Offerings 5. Intrastate Offering 6. Regulation A+ Offering 7. Commercial Paper 8. Promissory note 9. Secs issued by Small Business Investment Companies (SBIC) 10. Banks and Savings and Loans 11. Motor carriers regulated by Interstate Commerce Commission (ICC) 12. Ctfts issued by receiver or by trustee in bankruptcy w/ approval of a court

agent does not include an individual who represents an issuer in effecting transactions in some exempt securities which are:

1. US Gov Secs 2. muni secs 3. canadian government secs 4. banks 5. promissory notes and investment contracts (dont have to register as an agent)

exempt securities (exempt from State Registration because they will be registered at the federal level)****

1. US Gov Secs 2. Municipal Securities (both GO and Rev bonds) 3. Secs issued/guaranteed by country of Canada or its provinces (but not secs listed on Canadian Exchange, secs issued by Canadian companies or Canadian insurance companies) 4. Secs issued by US banks, savings institutions, or trust companies organized under State laws (but not secs issued by Holding Companies which may own banks) 5. secs issued by federal savings and loan association 6. credit unions 7. secs issued by US insurance companies 8. any sec listed on registered stock exchange or NASDAQ: then these are also exempt if issue bc senior or equal in rank - secured bonds (convertible & non, ie mortgage and equipment bonds), unsecured bonds (convert & non, ie debentures), preferred stock (convertible and non) 9. non-profit issues 10. Promissory Notes, Commercial Paper, or Bills of Exchange issued in denomination of $50,000 or greater 11. Public Utility and Common Carrier Securities (ie railroad carrier, but not cruise line or airlines) 12. Investment Contracts in connection with employee stock purchase plan, savings/pension/profit share

the following are considered Federal Covered Securities because an Exemption exists from registration at the federal level under the 1933 Act:

1. US Gov Securities 2. Muni bonds offered outside the state of issue (interstate) 3. Securities Unregistered/ Private Placements (Reg D Offerings)

structured products typically have 2 components:

1. a note - fixed income component that pays interest to the investor at a specified rate and interval 2. a derivative (often an option) - establishes the payment at maturity based on the performance of the underlying assets

order ticket for a securities transaction must include:

1. account number 2. time order was received 3. agent on account 4. terms and conditions of the order

an IA may pay a cash fee (referral fee) to a person soliciting advisory clients ONLY if:

1. adviser = registered with SEC 2. Solicitor X subject to SEC suspensions/limitations & 3. There is a WRITTEN AGREEMENT between the solicitor and IA and kept by the IA

the administrator may require filing of any/all documents in respect to a "covered security":

1. all documents part of federal registration prior to initial offering 2. Consent to Service of Process signed by issuer along with fees 3. federal amendment registration documents 4. value report of federal covered secs offered in this state 5. any necessary filing fees

when initial registration is filed, it must include

1. an application 2. the registration fee 3. consent to service of process 4. a bond/surety bond

the IA Act of 1940 requires an investment company to obtain majority shareholder approval for : 1. 2. 3. Compensation agreements between _________ & __________. Agreement must be _____________ and cannot continue for more than _____________ without shareholder approval. The agreement creates a fiduciary duty between the fund and the IA 4.

1. any deviation from the funds investment objective 2. using fund assets t pay for the cost of distributing fund shares (12b-1 fees) 3. fund & IA must be in WRITING no more than 2 years 4. Renewal of IA's contract

every application for registration must contain:

1. applicant's form and place of business 2. applicant's proposed method of doing business 3. applicant's qualifications and business history 4. any injunction or admin order or conviction of a misdemeanor involving securities and any conviction of felony 5. applicant's financial condition and history 6. any info to be furnished to clients, if the applicant is an IA 7. Form BD for BD Registration

no stop order denying effectiveness to a registration statement or suspending or revoking effectiveness of any registration statement may be entered without prior notice to:

1. applicant/registrant 2. issuer, and 3 person who securities are offered (SRO/FINRA notification is not required)

REITs avoid double taxation on profits applicable to other corporations if they satisfy 4 conditions 1. REIT must distribute _____________ of its __________ in form of dividends to shareholders how often? 2. Have _________________ of its ____________ invested in real estate, mortgage loans, shares of other REITs, cash, or government securities 3. REIT must derive ______________ of its gross income from rents, mortgage interest, or gains from the sale of property 4. REIT must have ___________ shareholders and _______________ of the outstanding shares can be concentrated in the hands of _________ shareholders

1. at least 90% of profits in form of dividends ANNUALLY 2. @ least 75% of assets 3. 75% of gross income 4. at least 100 shareholders and less than 50% of outstanding shares can be concentrated in hands of 5 or fewer shareholders

types of federal income tax rates 1. 2. 3.

1. average or effective tax rate 2. income tax rate 3. marginal tax rate

Value investors look at 1. 2. 3. 4. 5. 6.

1. book value 2. overall yield 3. dividend yield 4. P/E ratio 5. Price/sales 6. Capitalization of the company

business continuity and succession plan should provide for at least the following

1. books and records backups 2. alternate means of communications with customers, key ppl, employees, vendors, service providers, regulators 3. providing notice of a significant business interruption or death of key personnel 4. office relocations 4. assignment of duties to qualified people

to implement an easy money policy, the Fed would - all would increase excess reserves

1. buy treasury secs in open market 2 reduce the discount rate 3 lower the reserve requirement of member banks

IA Act of 1940 Custody of Client Funds and Securities 1. IA must identify, segregate, and place in safe-keeping, _________ each client's securities 2. Client's funds must be deposited in 1 or more bank accounts which contain ______________ 3. maintain records for each account and the amount of each client's __________ 4. notify clients IN WRITING ____________________ in which funds and securities will be maintained and give prompt WRITTEN notice of any change 5. IA must provide each client with an itemized statement when? 6. IAs must arrange with an ______________________- for an unannounced examination to verify clients' funds and securities in custody how often? Then (answer above) is required to file Form ________ with the SEC within: (a) _________________ for material discrepancies OR (b) _____________________ of the surprise audit if no big problems 7. If client is out of town and gives IA auth to write checks out of client's check book to pay __________________ for the account, it WOULD be considered custody of client funds 8. If an IAR is the ____________ of the client's trust account, the IAR would be considered to have custody of a client's funds. 9. If a client mistakenly sends a check to the IA instead of the IA's custodian, the IA may within _________________, return the check to the client and request the client ____________________ to avoid "custody" of client funds 10. Does custody include pre-payment of advisory fees?

1. by client 2. only client funds 3. beneficial interest 4. location and manner 5. every 3 months/ quarterly 6. with an independent public accountant at least 1x a year Form ADV-E (a) within 1 business day for material (b) 120 days 7. custodial fees ONLY 8. Trustee 9. 3 business days & re-issue the check payable to the custodian 10. NO

IA Act of 1940: record keeping can be kept electronically if: USA:

1. can be read 2. copies can be made 3. duplicate copy is stored in separate location USA: all of those +can not be altered

Estate documents that may be required for this type of account include: 1. 2. 3.

1. certified copy of death certificate 2. will 3. inheritance or estate tax waiver

material changes

1. changes in ownership 2. changes of address/contact info 3. changes to registrations/ registered employees

Qualified Domestic Relations Order (QDRO) decree or order can relate to 1. 2. 3.

1. child support 2. alimony payments 3. marital property rights to a spouse

Safe Harbor 404C Provisions plan participants must: 1. Have ability to choose btwn ___________ categories of investments and must differ 2. Be provided with a certain level of investor _______________ related to various factors that affect investments such as : 1. T 2. Anticipated _______ 3. The ______________ relationship 4. Benefits of _________ 5. ______________ for such plan 3. Be informed that they can make changes to their plan how often? and no less than _____________. Those who offer these plans : - are prohibited from offering as one of the investment categories, a plan that is _________

1. choose between 3 2. education and disclosures 1. Time horizon 2. Anticipated levels of return 3. The risk/reward relationship 4. The benefits of proper diversification 5. Realistic goals and objectives for such a plan 3. be informed that they can make changes to their plan a regular basis and no less then quarterly - can't offer a plan that is made up of securities of the company offering the plan

shareholders equity includes 1. 2. 3. 4.

1. common & preferred stock 2. Treasury Stock 3. Paid-In Surplus 4. Retained Earnings

when economy is: 1. Expanding (recover), managers invest in __________ 2. Peaking (of the recovery; interest rates usually rising), managers invest in __________ 3. Contracting (beginning of recession), managers invest in __________ 4. Trough (bottom of recession, managers invest in _________

1. expanding -> industrials 2. peaking -> consumer staples 3. contracting -> utilities 4. trough -> technology and as the recession nears an end, industrials

registration by both Canadian BDs and agents of Canadian BDs requires the following

1. filing of application as required by jurisdiction where it has its HEAD OFFICE 2. Filing of a consent to service of process 3. Registration in good standing in the jurisdiction from which the firm or agent is effecting transactions and filing evidence of effecting transactions 4. BDs must be members of a SRO or stock exchange in Canada

2 types of beneficiaries of a trust 1. receive interest and other income from the property 2. generally receive the property upon the passing of the first beneficiary - which beneficiaries's needs must the trustee consider

1. first or income beneficiaries 2. remainderman or second beneficiaries - trustee must consider both's needs at the same time

members of the public include

1. individual investors 2. accredited investors 3. public employees 4. private employees 5. trust accounts (set up for minors)

discounts for open-end fund sales charges may be given to:

1. individuals who qualify for quantity discounts 2. employee benefit plans 3. directors officers patness employees 4. fund contractual plans or plan companies

Death benefits are usually paid as a lump sum, but can be paid using the following settlement options: 1. 2. 3. 4.

1. interest only 2. fixed annual installments until funds are exhausted 3. fixed installments until the period ends 4. life annuity

variable policies with separate accounts generally have deductions from separate account: 1. 2. 3.

1. investment advisory or management fee 2. mortality and expenses charge 3. death benefit guarantee charges

A registration may be canceled by the administrator if the person:

1. is no longer in existence or cannot be located after the Administrator has made a reasonable search 2. ceased doing business as an IA, BD, or agent 3. Who is an individual, has been found mentally incompetent

exempt transactions : transactions that do not include issuers or underwriters involved in a public offering and are exempt from registration/advertising requirements include:

1. isolated "non-issuer" transaction 2. non-issuer transactions by registered agents at registered BDs if: (a) issuer of security being traded is engaged in business and is NOT in the organizational stage, in the bankruptcy or receivership stage, a blank check, blind pool, or shell company; (b) security is senior in rank to the common stock of the issuer and has been outstanding for at least 3 years without default 3. non-issuer transactions effected by/through a registered BD pursuant to an unsolicited order/offer to buy 4. Fiduciary Transactions 5. Bona Fide Pledges of Securities 6. Underwriter trans (trans for new issues between underwriters and issuers) 7. Transactions with Financial Institutions 8. Private Placements sold to not more than 10 persons other than institutional investors during a 12-month period 9. Mortgage Bond transactions issued as a unit 10. pre-organization subscription transactions 11. Rights, Warrants, and Convertible Securities Transactions if no commission or remuneration is paid

to register a security listed on an exchange, information must be filed regarding: 1. 2. 3. issuer's BS for ________ 4. 5.

1. issuer 2. any person directly or indirectly controls/is controlled by the issuer 3. issuer's BS for last 3 years 4. names of officers, directors, UWs of firm 5. organization, financial structure, and nature of business

an offer is considered to have been made in a state when:

1. it originates in state 2 it is directed to the state 3 it is accepted in the state

Following Books and Records must keep records of: 1. journals of ___________ 2. Ledges showing: 3. Memorandum of each order including: (a) (b) (c) (d) (e) 4. ____________, ________, ___________, but NOT log of all phone calls received 5. originals of all communications received and copies of all communications sent to __________________ 6. 7. 8. copy of each notice, circular, advertisement, or other communication circulated to ______________ 9. record of every transaction in which IA acquires __________________ 10. copy of all written disclosure statements including: (a) (b) 11. all records in regards to calculation of 12. current and historical copies of _____________

1. journals of cash receipts and disbursements and other records of original entry 2. Ledgers showing assets, liabilities, reserves, capital, income, and expenses 3. Memorandum of each order, including the (a)terms and conditions of the order (b) name of person who recommended the transaction (c) account number (NOT name of person) (d) date (e) name of BD/bank that executed order 4. Checkbooks, bank records, bills , NOT log of all phone calls received 5. originals of all communications received and copies of all communications sent to the public or clients relating to any investments or recommendations 6. Discretionary auth and power of attorney 7. all written agreements between IA and customer 8. copy of each notice, circular, advertisement, or other communication circulated to 2 or more ppl (including seminar materials) 9. record of every transaction in which IA acquires beneficial ownership of a security 10. copy of all written disclosure statements including: (a) dates sent to customers (b) signed written receipts received from customers 11. all records in regards to calculation of performance or rate of return where recommendations are distributed 12. current & historical copies of Form ADV-Pt3 including amendments and records of the dates the Form has been filed with the SEC and delivered to customers

Systematic or unsystematic risks? (S or U) 1. market risk 2. interest rate risk 3. Regulatory risk 4. Reinvestment Risk 5. Business Risk 6. Inflation Risk 7. Liquidity risk 8. Competitive Risk 9. Political Risk 10. Credit Risk

1. market risk S 2. interest rate risk S 3. Regulatory risk U 4. Reinvestment Risk S 5. Business Risk U 6. Inflation Risk S 7. Liquidity risk U 8. Competitive Risk U 9. Political Risk U 10. Credit Risk U

The 1940 Act requires an investment company to get an exemption from the SEC : 1. for a 2. for a 3. to own more than ________ of the shares of another fund

1. merger between 2 investment companies 2. purchase of assets from the fund's IA 3. more than 3%

IA: Shall not write a memorandum to buy/sell orders of securities without including: 1. 2. 3.

1. name of BD who executed order 2. Person who recommended trade 3. Person Placing the order

excluded from the federal definition of federal covered security

1. non profit issued securities 2. muni bonds offered ONLY in the state of the issuer 3. intrastate offerings (within one particular state) 4. security issued with guarantee from another entity as to principal, interest, OR dividends

Valuation on modern indexed annuities 3 basic means of determining how the interest will be calculated and credited to the client's account

1. participation rates 2. spread/margin/asset fees 3. interest rate caps

type of technical analysis 1. 2. 3. 4. 5.

1. point and figure 2. moving averages 3. advances and declines 4. odd lot purchases and sales 5. changes in the price-earnings ratio of the Dow Jones Industrial Average during the past year

Exempt transactions under '33 Act

1. privately held corporation issuing stock to a new stockholder 2. investment manager for an insurance company negotiating with a financial executive of a publicly held corp to buy a note 3. broker trans that are unsolicited 4. intrastate offerings

1. If the NPV is Positive (above zero) what does this mean for the investment? 2. If the NPV is Negative (below zero) what does this mean for the investment? 3. If the NPV is equal to 0 what does this mean for the investment?

1. profitable and exceed required rate of return 2. lose money and not meet required rate of return 3. no net gains or losses dont pursue investment unless outside factors

If IA has custody or possession of securities or funds of a customer, need to keep 1. Journal and separate ledger showing all: (a) (b) (c) (d) 2. copies of all _____________ 3. a record showing: (a) (b) (c)

1. purchases, sales, receipts, deliveries of securities 2. copies of all confirmations 3. record showing a. name of customer b. amount of interest c. location of security

direct investments in real estate 1. 2. 3.

1. raw land 2. primary residence 3. rental property

unlawful to transact business in a state as an IA or IAR unless

1. registered under act 2. exempt from registration because they have no place of business in the state and their only clients in the state are NOT members of the public, and they don't have over 5 clients in 12 consecutive months 3. there are federally covered advisers who have filed a notice with the state if required

it is unlawful for any person to offer or sell any security in a state unless

1. registered under the act 2. security or trans is exempt from registration 3. security is a Federal Covered Security

Exempt securities and exempt transactions are only exempt from 2 things:

1. registration requirements 2. filing of advertising and sales literature

type of trusts 1. 2. 3. 4.

1. revocable = changeable 2. irrevocable = unchangeable 3. living (revocable or irrevocable trust set-up while the grantor is "living"), 4. testamentary trusts (a trust created from will) not perpetual or corpus trusts

included list of securities that must be registered with the SEC include:

1. securities listed/authorized for listing on a national stock exchange 2. investment company or pooled investment fund shares (mutual funds) 3. securities sold to "qualified purchasers" which includes wealthy individuals couples family businesses or trust sponsored by qualified persons

policyholder can access the cash from the CSV by: 1. 2.

1. taking a loan against the cash value 2. surrendering policy for its CSV

As a general rule, if you work for more than _________ years you are eligible for the Workers Benefit of Social Security

10 Years

A person who has been convicted of securities misdemeanor in the last _______ is subject to statutory disqualification which effectively bars that person from the securities industry. to re-enter the industry, that person would need approval of __________

10 years SEC

if current interest rates were 5% and an investor needed $10,000 in 5 years, how much would they need to invest now?

10,000/(1+.05)^5= 10,000/1.27628= $7,835.27

T Bond maturities

10-30 years

When do Brady Bonds mature?

10-30 years

does a 10-K or a shareholder's report contain more detail?

10-K

comprehensive summary report of a company's performance that must be submitted annually to the SEC. contains much more detail than the annual shareholder's report

10-K Report

standard advisory fees = _______ of AUM and _______ of performance based fees

2% AUM and 20% performance based fees

After a minimum _________ waiting period or "cooling off period" the registration statement becomes "effective" allowing the security to be sold. Securities may be offered for sale by means of a ____________________ which must be delivered no later than with the purchase confirmation.

20 day Final Prospectus

If the total costs of trading in a customer's account rises above ______ it could be deemed as excessive trading

20%

Risk Free Rate of Return is the rate of return on what?

3 month Treasury Bill

An IA must keep a copy of all books and records for _______________ after the termination of the enterprise of the IA

3 years

Securities Act of 1933 required that civil actions for alleged liability for false or misleading info concerning a new issue be brought within __________ from the offering of the security to the public

3 years

Even with disclosure, advisory fees may not be excessive. The SEC takes the position that IA fees should not be higher than what other IAs charge for similar services and a specific disclosure would be required for annual fees of ____________ of AUM Industry standard = ______ of AUM measured annually and ________ of annual profits when dealing with allowable, performance-based fees

3% or higher 2% AUM annually 20% performance based

Russell 3000 Index is made up of

3,000 of the largest companies

For new issues, members of the UW Syndicate must receive full payment within ___________ of the purchase of the new issue shares

35 days

Penalty for trading on material non-public information is _______________________________. If the IAR trades on material non public info, who is liable to pay?

3x the profit gained or losses avoided both IAR and advisory firm employer

Wilshire 5000 Index is made up of ________ based on __________

7,000 largest companies based on market capitalization

alpha formula =

= Realized Return - (Market Return x Beta)

types of federal income tax rates average or effective tax rate - formula = - tax that customer pays when?

= amount of tax paid / taxable income - customer pays over a period of time

Acid Test Ratio or Quick Ratio = What is the Standard Minimum? Most stringent measure of what?

= current assets less inventory/ current liabilityes Standard = 1:1 most stringent measure of CORPORATE LIQUIDITY

After-tax Rates of Return formula =

= gross rate of return - tax liability

What should be included in an investment policy statement? A. client's or participant's investment goals and objectives B. Statement of purpose and responsibilities C. Specific criteria for selecting securities for the investment portfolio. D. Guidelines for review E. Compensation arrangements for the IA F. Risk Tolerance and liquidity requirements G. Summary Plan Description H. Recommended allocations among asset classes as to minimize the risk of large losses I. Tax Treatment of specific investments held in the plan. J. Expected Returns and the expected range of returns (benchmarks relative to objectives) K. Time horizon

A. client's or participant's investment goals and objectives B. Statement of purpose and responsibilities D. Guidelines for review F. Risk Tolerance and liquidity requirements H. Recommended allocations among asset classes as to minimize the risk of large losses J. Expected Returns and the expected range of returns (benchmarks relative to objectives) K. Time horizon

payments for unaffiliated solicitors solicitor's written disclosure must disclose which of the following? A. name of solicitor and services provided B. name of BD executing trades C. name of IA D. Business background of solicitor E. nature of relationship btwn solicitor and IA F. statement that solicitor will be compensated and compensation agreement G. Amount (if any) that client will be charged in addition to advisory fee

A. name of solicitor and services provided C. name of IA E. nature of relationship btwn solicitor and IA F. statement that solicitor will be compensated and compensation agreement G. Amount (if any) that client will be charged in addition to advisory fee

An investor would: _____________ if they expect the values of stocks or futures to rise ____________ if they expect values of stocks or futures to remain stable or decline modestly and are looking for income ____________ If they expect the values of stocks or futures to decline _____________ if they expect the values of stocks or futures to remain stable or appreciate modestly and are looking for income

An investor would: Buy Calls - if they expect the values of stocks or futures to rise Sell Calls - if they expect values of stocks or futures to remain stable or decline modestly and are looking for income Buy Puts - If they expect the values of stocks or futures to decline Sell Puts - if they expect the values of stocks or futures to remain stable or appreciate modestly and are looking for income

regular payment made to a retired person from an investment fund to which that person or that person's employer made contributions during that person's working life

pensions

dollar cost averaging - involve buying fixed number shares at regular intervals? - involves investing a fixed number of dollars at regular intervals

fixed number of dollars at regular intervals

who bears risk in variable and fixed annuities?

fixed- insurance company variable-annuitant

Billy wants to tour the country in a new motor home. He goes to the RV dealership and the salesman tells Billy that for merely $500/month, he can drive away today. The interest rate that Billy qualifies is 7.5% calculated monthly, and the term on the loan is 10 years. How much did Billy borrow to buy this RV? a. $6,000 b. 12,250 c. $42,125 d. $60,000

Billy will owe the amount to buy the RV but will also have to pay 7.5% in interest on this amount over a 10 year period with payments of $500/month for 10 years we can find that Billy will make 12 months x 10 years = 120 monthly payments 120 x $500 monthly payments = $60,000 paid a total but also has to pay interest on the loan, so the total is going to be over 60k so can eliminate D as an answer Terms of the loan require Billy to pay $500 per month for 10 years. This works out to $6,000 per year in payments. So answer "A" would NOT be correct because it would only cover 1 year of payments. Billy would not pay $6,000/yr for 10 years in order to repay a $6,000 loan. Repayment of a 6k loan at 500/month and 7.5% interest would take just over 1 year 12,250 is way too low. With a $500/month pmt at a rate of 7.5% a $12,250 loan would be repaid in less than 3 years and our loan term is 10 years 42,125/60,000= around 70%

DCF figures are most reliable when evaluating investments with known characteristics such as _____________

fixed-income securities

NASAA Custody Requirements Form __________ is completed by an IA who has custody of client funds then given to independent CPA who examines client funds in custody, then forwards to the form to SEC or State Administrator with the accountant's certificate of accounting

Form ADV-E

does a SEP IRA have a high or low cost of administration?

low cost of administration

taxation of an early withdrawal is LIFO or FIFO? if the annuitant is under 59.5 and they withdraw what happens?

LIFO meaning that earnings are taxed first, plus a 10% penalty tax

are LT bonds or ST bonds riskier?

LT bonds are riskier. ST bonds are considered to be safer

MSRB rules state unless the advertisement includes (realized return? total return?) quotations current to the most recent ______________ ended _______________________ prior to the date on any use of the advertisement, the legend must also identify wither a _________________ or _____________ where an investor may obtain those quotations.

MSRB rules state unless the advertisement includes (realized return? total return?) quotations current to the most recent month ended 7 business days prior to the date on any use of the advertisement, the legend must also identify either a website or toll free number where an investor may obtain those quotations.

Do ETNs have coupon rates/ pay dividends or interest? How are ETNs taxed?

NO so there is not normally any annual income to the investor holders of ETNNs will pay capital gains or losses associated with their units, pay LT gains rates

Can the IA loan money to a client who is a relative?

NO unless the IA is a financial institution in the business of loaning funds or the client/relative is an affiliate of the IA

Increase of tax rates on individual investors or businesses would or wouldn't be effective in turning around a recessionary period and why?

NOT because it reduces the amount of income consumers and businesses may use to spend aka tightening spending

if the owner of an IRA dies and the designated beneficiary is: non-spouse - can non-spouse become owner of account? - can non-spouse make contributions to account? - can non-spouse rollover IRA to another IRA? - Does the non-spouse have to pay taxes on the distribution?

NOT become owner - NOT make contribs - NOT rollover to their own IRA - have to pay tax on distributions as ordinary income to the beneficiary in the year that the distribution is received

if the owner of an IRA dies and the designated beneficiary is: a charity - will the charity need to pay taxes on distributions?

NOT income tax since charity pays no income taxes on gifts received

what happens to the P/E ratio when a stock split occurs?

NOTHING - does not change

form of DCF methodology which uses discounting to find the present value of inflows (revenues) and outflows (expenses) for each year of a given investment

NPV - Net Present Value

Analysts use DCF to evaluate an investment's inflow and outflows as well as the expected cost of capital related to the investment to determine the _____________ and the ____________ of the project

NPV - present value of project and IRR - expected rate of return

figure on income statement that gives the overall profitability of a company before the payment of dividends on preferred and common stocks

Net Income

Return on Assets =

Net Income (Net Profits after tax) / Total Tangible Assets

Return on Equity =

Net Income/ Shareholder's Equity

a BD that is a member of an underwriting syndicate receives compensation from ______________

UW Spread, not commissions

Bond ETFs generally have (high/low) cost compared to bonds

low cost way to invest in bonds

starting point to calculate federal income tax liability

adjusted gross income (AGI)

who is the designated state official administers and enforces securities regulations and the USA in a given state?

administrator

type of technical analysis ratio of advancing stock prices to declining stock prices

advances and declines

for life insurance products the premiums are generally paid with _______ and are tax-deductible or not tax-deductible

after tax dollars not tax deductible

Non-Qualified annuities are bought with _______________ how are distributions taxed?

after tax dollars only the earnings are taxable

replacement policies for life insurance - can they avoid taxation?

can avoid current taxation on any gain in the old policy by making a Sec. 1035 tax-free exchange.

total return equation =

amount received from investment/ amount paid for investment

an industry sector ETF would be (more/less) affected by overall changes in the market and offers (more/less) diversification when compared to a broad-based ETF but would provide diversification within a particular sector

an industry sector ETF would be LESS affected by overall changes in the market and offers LESS diversification when compared to a broad-based ETF but would provide diversification within a particular sector

formula for common stock dividend yield or current yield =

annual dividend/ current market price

Cost of regular and recurring fund operating expenses

annual fund operating expenses

after-tax yield formula =

annual interest * (100% - Investor's Tax Rate)

current yield on bonds formula =

annual interest/ market price

Calculating stock price based on expected annual payouts and a client's required rate of return: price for a given yield =

annual payout/ required rate of return

Total return is the return on investment in what period of time? - it includes: 1. 2. 3. 4.

annual rate of return 1. appreciation 2. capital gains/losses 3. dividends or interest 4. other distributions

10-K - must be submitted when?

annually

12b-1 fees are charged how often?

annually

renewal application for Canadian BDs and Agents must be filed when

annually by December 1st

Exchange fee is a fee charged to an investor if they exchange shares for what?

another fund within the same fund family

interest rate risk - applies to what? - price of __________ will move in which direction to interest rates?

applies to bonds and fixed income securities price of bond will move in opposite direction to IRs

if the index or strategy that an ETN is linked to appreciates in value, ______________________________ If the index or strategy depreciates in value, ________________________

appreciates -> unit holders participate in appreciation LESS investor fees, which normally accumulate annually depreciates in value-> unit holders can see losses associated with their ETN holdings and are STILL subject to investor fees

The world banks purpose

assist developing nations by providing them with loans

the world banks purpose is to ___________-

assist developing nations by providing them with loans

BD any partner, officer, director, or branch manager of a BD, any person directly or indirectly controlled by or under common control of BD and any employee of the BD except any person whose functions are solely clerical

associated person of a BD

evaluating the company's debt to equity, debt to total capital, and debt to book value ratios are all ways to measure

company's financial leverage

mkt price of shares in a Bond ETF is based on _____________________ and (can/cannot) be different than the NAV per share of the fund.

based on supply and demand and can be different - if mkt value is higher = premium - if mkt value is lower = discount

Mutual Funds Investment Income or Dividends - Fund deducts its operating expenses before or after paying dividends to customers?

before

Descending/Inverted/Negative Yield Curve

bond buyers may want to buy short-term maturities because thats where get best yield and are safest - "interest rates have gone up sharply and quickly" - long term interest rates are lower than short term - short term rates exceed long term - indicates periods of tight money and rising interest rates

is bond interest tax deductible on the income statement? are dividends tax deductible on the income statement?

bond interest IS tax deductible dividends are NOT tax deductible

if the federal reserve buys government securities in the open market,

bond prices will increase, yields will decrease

when using diversification to lower or reduce risk, an investment adviser would consider investments in A domestic investments B foreign investments C both

both

how are earnings taxed for fixed and variable annuities?

both - earnings are tax deferred until annuitization unless holder makes early withdrawals

if the cash surrender value is paid to the policyholder, what happens to the policy and DB?

both canceled

Do ETNs or ETFs have market risk?

both have market risk associated with the performance of the market which the ETN or ETF is attempting to mirror

Scaling in - investment strategy where securities are (bought/sold) (in increments/in lump sum) to achieve any overall total goal to attain an average ______________ as the value of the security is (increasing/declining)

bought in increments average purchase price declining

Qualified annuities are bought with _______________ how are distributions taxed?

bought with before tax dollars - all distributions are taxable

Volume discount offered to investors in investment companies where investors can receive a lower sales load due to the amount of money invested

breakpoint

the Standard and Poor's 500 Index is : - made up of ___________ - generally considered to be ___________-

broad, large cap index - measure of average market performance

risk associated with the unique situation of an individual company - can be reduced by diversification within an asset class - risk that a company will fail

business/credit/financial risk/ unsystematic risk

open market operations : Fed would buy or sell treasury securities to stimulate the economy when inflation is not a threat

buy

a bearish investor is short ABC common stock and is concerned that the stock may rise in value. What should they do?

buy a call to protect against rise inn market value

a bullish investor is long ABC common stock but is concerned that the stock may decline in value. What should they do?

buy a put option

portfolio management strategy in which investment manager or investor designs a portfolio and purchases appropriate investments to fit that portfolio, then holds the investments with the anticipation of income and appreciation

buy and hold strategy

what is the simplest form of portfolio management with no rebalancing?

buy and hold strategy

Bonds trading at a discount = bond is paying interest rate that is (higher/lower) than the current prevailing rate in the market?

lower

strategy whereby a portfolio manager has the opportunity to actively manage a portfolio but if the returns fall below a specified level, then the active management ceases and immunization of the portfolio occurs

contingent immunization strategy

do the opposite of what most investors are doing at any particular time

contrarian investors

defined contribution plan - amount of pension employee receives depends on __________

contributions made to the employees account + actual earnings on contributions

bonds are converted at a specific rate which tells you how many shares of common stock the investor would receive upon conversion

conversion price

for large yield changes the bond price volatility is measured by __________

convexity

a form of registration used for new issues with pending registration with SEC

coordination

what would an IPO of a new NASDAQ stock be an example of? coordination, notice filing, or qualification?

coordination

client investment objective = income , what should they invest in?

corporate bonds corporate bond funds REITs for high yield interest income preferred stocks, utility stocks, and blue chip stocks for dividend income

credit spread/ spread cited most often is the difference of a _________ compared to a __________

corporate issue w/ a US Treasury issue

corporate yield -> municipal yield

corporate yield *(100% - investors tax rate) = muni equivalent yield

measures the correlation of the returns of a specific portfolio compared to the return of the market as a whole

correlation coefficient

ranges from -1 to +1 and is a coefficient developed using a series of data points

correlation coefficient or the R-value

are notes payable current or long term liabilities on the balance sheet?

current liabilities

tactical asset allocation focuses of (LT/ST) asset mixx. Adjustments can be made to the targeted balances within a range based on ___________

current market conditions and economic conditions

market capitalization is equal to:

current market price per share x number of shares outstanding

In connection with the solicitation of investment company shares, stating or implying to a customer the funds ____________ without disclosing the fund's most recent average __________,

current yield or current income annual return calculated using the SEC's calculation for the one five and 10 year periods and fully explaining the difference between current yield and total return may be cause for suspension or revocation

If the IA has custody of client funds or securities: If the IA is registered at the federal level under the IA Act of 1940 and requires prepayment of fees 6 months or more in advance in excess of _______. If IA is registered at the State level under the USA and requires pre=payment of fees 6 months or more in advance in excess of ______________: If the IA has discretionary authority over client's funds or securities: If IA has custody due to direct fee deduction or due to pooled investment vehicles (mutual funds): What is min required net worth and what are the balance sheet requirements?

custody= $35k; audited BS must be filed IA Act of 1940 excess of $1,200: Positive net worth; audited USA in excess of $500: Positive net worth; audited Discretionary auth: $10k; BS NOT audited custody w/ direct fee: EXEMPT

bonds trading at a premium will always have a basis (YTM) which is (higher/lower) than the coupon rate

lower

Mutual Funds Investment Income or Dividends - are derived from ?

dividends, interest, and short term gains in the portfolio

upon completion of a person's will, the original copy should be kept in a safe place like a safe deposit box by a bank with the lawyer that created the will. Generally, a will should be reviewed how often?

every 5 years

estimates the return on an investment based on certain scenarios and weighs these estimates based on the probability of the occurence of each scenario

expected return

Calculate the overall expected return for ABC common stock if the bull market has a projected return of 15% and a likelihood of occurrence of 40%, the bear market has a projected return of -10% and a likelihood of occurrence of 30%, and the neutral market has a projected return of 7% and a likelihood of occurrence of 30%

expected return of bull = .15*.4=.06 expected return of bear= -.1*.3=-.03 expected return of neutral = .07*.3=.021 .06-.03+.021= .051 5.1%

a security covered by federal law under the securities act of 1933 which must be registered with the SEC (not the states) or exempt from registration with the SEC is a

federal covered security

Equity Indexed Annuity point-to-point - is a term that refers to a _____________ indexed annuity crediting method - indexed annuities credit a level of ________ to the contract owner which can be based on or linked to the performance of equity markets

fixed interest

CSV accumulate on either a ________ basis on whole life policies or ____________ on variable life policies

fixed = whole life variable = variable

when you annuitize a variable annuity, is the amount of units you receive variable or fixed?

fixed but the value fluctuates based on the value of the securities in the sub account

laddering - involves the purchase of _______________ securities with different __________________________ in an attempt to reduce _______________________

fixed income maturities and coupon rates interest rate risk and re-investment risk

2 basic types of annuities

fixed: pays same predetermined dollar amount each period variable: pays fluctuating $ amount each period varying on the value of securities in Separate account of insurance company issuing the variable annuity contracts

Employee Stock option policies and exercise transactions can be found where?

footnotes of company's annual report

when a BD or IA firm first files for registration, the initial registration is active until when? when will registration be renewed?

for remainder of year until Dec 31st renewed annually

when is qualification used?

for securities not generally filed with SEC but registered (qualified) in state of issuance

Investment Companies General Info With any fund, diversification is achieved whether within a certain sector, or across global markets with investing in ____________ securities

foreign

in fixed exchange rate system, the exchange rate is determined by

foreign governments working through their central banks

what is required to support a claim under the surety/fidelity bond?

formal Proof od Loss

calculated using the projected future earnings of the company, generally when

forward P/E upcoming 12 month period

cash contract in which seller agrees to deliver a specific cash commodity to the buyer at some point in the future

forward contract

interests in tenants in common arrangements are thought of as being _______________

freely transferrable, because of the fact that interest only changes hands after death of owner

Monte Carlo Simulation creates a _____________ based on a wide range of _____________

frequency distribution table wide range of potential outcomes

illegal practice of making a trade based on advanced knowledge of a transaction/event that will affect the price of the security

front-running

trusts - created by ________________ who entrusts property to the person of their choice, a _______________, who is obliged to hold the property for the benefit of one or more individuals, ______________.

grantor trustee beneficiary

the larger the credit spread between a corporate and treasury bond, the (greater/lower) the risk of investing in a corporate bond

greater

long term bonds react the ___________ to interest rate changes

greatest

(high/low) yield, (high/low) P/E stock would provide the value investor with income

high yield and LOW P/E

Bonds trading at a premium = bond is paying interest rate that is (higher/lower) than the current prevailing rate in the market?

higher

bonds trading at a discount will always have a basis (YTM) which is (higher/lower) than the coupon rate

higher

buying mutual fund shares just below a breakpoint amount forces the investor to pay a _____________ sales load

higher

call premium over the face or par value of the bond will cause the yield to call on the bonds trading at a DISCOUNT or Par value to be (higher/lower) than the yield to maturity?

higher

the (higher/lower) the Sharpe ratio, the better the performance of the manager or safer the manager's strategy

higher

assuming a call price that is equal to the face or par value of the bond, the yield to call would be: - (Higher/Lower) than the Yield to Maturity on bonds trading at a discount - (Higher/Lower) than the Yield to Maturity on bonds trading at a premium

higher than YTM on bonds trading @ Discount Lower than YTM on bonds trading @ Premium

If an investor is comparing multiple investments and the goal is to achieve the highest return (annualized or total), the investor should seek the investment with the (highest/lowest) YTM

highest

term policies provide the highest or lowest amount of death benefit for every dollar of premium paid

highest amount

in strategic asset allocation, these assets are maintained in order to achieve ___________

highest anticipated return vs risk

when securities are given as a gift, what happens to the holding period of the securities?

holding period of donor will be added to holding period of the donee when securities are sold at a GAIN

Generally, ESO - Employee Stock Option policies and exercise transactions would be found where ?

in the footnotes of the company's annual report

when are distributions taxed to limited partners? and at what rate are they taxed?

in the year the distribution was received @ the limited partners participation rate

Time-Weighted Return - investment performance measure where _____________ are eliminated - used to compare a portfolio manager's performance against what?

in-flow and out-flow of money are eliminated compare performance against a benchmark

If an IA oversees a securities portfolio of a Limited Partnership, the most important consideration in determining an investment strategy would be

income needs and requirements of all partners

Disadvantages of C Corp - Double Taxation:

income taxed first to the corporation, shareholders subject to taxation of dividends received

If IR are increasing in general, then it can be anticipated that DCF (returns) on new bonds and bond portfolios would (increase/decrease?)

increase

interest rates and the movement of the business cycle

interest rates parallel the movement of the business cycle

form of DCF methodology that uses discounting to find the present value of inflows and outflows for each year of a given investment, then sets the equation equal to zero in order to find the rate of return which gets the investment to a breakeven point which can then be compared to the estimated cost of capital, also known as the discount rate for a project

internal rate of return

floating exchange rate is determined by the

intervention of central banks, market forces, supply, and demand

Precious metal values and equities market have what relationship

inverse precious metal values tend to move in the opposite direction of the equities markets

do leveraged funds or inverse funds rely more heavily on derivatives to achieve their investment objectives?

inverse funds

Both preferred stock and bonds are fixed income securities. Therefore their market prices are sensitive to interest rate movements. Their prices have what relationship with interest rates?

inverse reaction interest rates go up, prices of outstanding bonds go down. move in opposite direction

managed wrap fee includes what in the fee

investment advice as well as transactions

company that issues its own shares to the public, and manages a portfolio of other securities for the benefit of its clients including the separate acts of insurance companies but not REITS, BDs, fixed insurance companies, or pooled investments in precious metals

investment company

written statement that provides plan fiduciaries who are responsible for investments with guidelines concerning investments and management decisions

investment policy statement

length of time until you need to liquidate an investment for a specific goal

investment time horizon

Risk adjusted return =

investment's total return - risk free rate of return

compared to a registered fund, are private fund's initial and ongoing costs generally higher or lower

lower

who decides the amount of the surety/fidelity bond?

left to the discretion of the Administrator, but amount applied to BDs cannot exceed the amount set by federal law.

Appreciation of US dollars causes US exports to become more or less competitive in US markets? causes foreign imports to become more or less competitive in US? why?

less competitive because more expensive to the buyer more competitive in US because less expensive

If a bond trading at a premium has a call price which is lower, the final yield to call (should the bond be called away), would be (more than/less than) the coupon rate of the bond?

less than

bond's price if trading at discount =

less than $1k

NASAA Delivery of the brochure and related brochure supplements do not need to be made to: clients who receive only impersonal advice and who pay _______________ per year, or ___________________ or _____________

less than $500 in fees per year investment company registered under 1940 act business development company

total return can be especially useful when comparing multiple investments which have a holding period of __________

less than 1 year

court order appointing someone as the representative of a decedent's estate

letters testamentary

written directive which states a person's desires with regards to their end-of-life wishes if they become mentally or physically incapacitated with no ability to communicate their decisions. Includes things like medical treatment and do-not-resuscitate directives

living will

long hedge is used by ____________ of commodities to protect against __________ prices short hedge would be used by ____________ of commodities to protect against __________ prices

long hedge is used by _buyers__ of commodities to protect against ___rising__ prices short hedge would be used by __sellers___ of commodities to protect against _falling__ prices

the best downside protection with options would be ____________

long put when the investor is long the stock -> Protective Put

___________ protect or hedge long stock positions __________ protect or hedge short stock positions

long puts hedge long stock long calls hedge short stock positions

if the yield curve is normal and positive are short term or long term rates more volatile?

long term rates are more volatile

Annuity is a suitable investment for someone with an investment objective of

long-term capital appreciationn

what classification does this go under on the Balance Sheet? debentures

long-term liabilities

those with (longer/shorter) time horizons are generally willing to be more aggressive with investments and invest in (more/less) liquid investments

longer less

Bonds with the (longest/shortest) maturities and the (highest/lowest) coupons have the greatest interest rate risk

longest maturities and lowest coupons have the greatest

real estate has a (high/low) correlation to other financial assets

low

yankee bonds are used when interest rates in the US are (high/low)

low

coverdell accounts are for what type of contributor

low and middle income level

approval of a contract with an investment adviser of or principal underwriter of a registered investment company requires approval of ____________-

majority of non-interested directors = directors who are NOT parties to such contract or agreement

Price to Earnings Ratio (P/E)

market price/ earnings per share

price to book ratio formula

market price/book value per share book value per share = (total stockholder's equity - preferred stock)/ common shares outstanding

bond that will mature in 10 years. it has a coupon rate of 5.25% and is trading at 103. If the bond is called away from the customer at 102 in 3 years, the investor would end up with a yield to call of (more than/less than) coupon rate of the bond?

market price=103 call price = 102 (103-102)= 1 point loss bond being called 7 years early would mean interest income loss of: $52.50*7years= less than coupon because the customer would suffer a loss in yield income and a loss in principal value

tactical asset allocation uses _______________

market timing

inherited securities being sold IRS allows step up in cost basis from original cost when it was purchased to the _____________ when?

market value of securities at the date of death of the decedent

is a really high P/E ratio a good or bad thing?

market value will decline because the company is overvalued

Pice of ABC Common Stock declined as the entire stock market declined today. This is an example of what type of risk?

market-wide risk or systematic risk

1. matching contributions based on the elective contributions made by employees of up to __________ compensation 2. Non-elective contributions of a straight___________ of compensation to each eligible employee

matching up to 3% compensation non-elective contributions of a straight 2% of compensation

What can a Broker Dealer or IA that reorganizes in the middle of a registration period do

may file an application to register the successor firm (whether in existence or not) for the unused portion of the year

the administrator may by order deny, suspend, or revoke any registration or bar or censure any registrant from employment if he finds that it is in the public interest and the the applicant/registrant is insolvent - meaning what?

meaning liabilities exceed assets and cannot meet obligations as they come due. applies to the firm not a principal of the firm

values used to measure statistical averages and frequency of numbers

measures of tendency

halfway point of a series of data points or numbers

median

Exception: If the investment advice for a client is provided by a team comprised of ______________, a current brochure supplement need only be delivered to that client for the _________________ with the most significant responsibility for the day-to-day advice provided to that client.

more than 5 supervised persons 5 supervised persons

Definition of an IA Engaging in the business means that the advisory services represent _________ of the IA's total sales and revenues before tax for the most recent ____________, not including investment company clients

more than 50% most recent 3 fiscal years

Operating Cash Flow / Cash Flow from Operations formula =

net income + depreciation & amortization

Delivery of Form ADV-Pt 3 New customers must be delivered when? If Info Materially Inaccurate - IA must file amended Form ADV-Pt3 with the SEC when? - Existing customers must be notified when?

new customer = before or at the time IA enters into an Investment advisory contract with retail investor new amended form w/ SEC within 30 days existing customers must be notified within 90 days

are investment companies considered to be derivatives?

nno

Are Real Estate Investment Trusts derivatives?

no

Do you forfeit your COLAs (Cost of Living Adjustment) if you choose to delay your claim to receive a larger payment of social security later?

no

Does the Investment Act of 1940 require that the investment advisory contract be in writing?

no

agency cross transaction: can an adviser recommend the transaction to both the buyer and the seller?

no

an issuer is any person who issues or proposes to issue any security for sale and receives the proceeds of the sale.. are corporations issuing certificates or interest in Oil, Gas, or Mining Titles/leases considered issuers?

no

are fees for registration prorated for portion years?

no

are insurance companies exempt from registration with the SEC under the '33 Act?

no

are mutual funds subject to the Glass-Steagall Act of '33?

no

can you offset qualified dividends against any other gains that you have?

no

do charitable foundations have to pay state or federal tax?

no

do you need to know the prime rate to develop an investment strategy for a client?

no

does a bond's rating need to be on a customer confirmation?

no

does income flow through to owners in a C Corporation?

no

does principal disclosure requirement apply to transactions with customer of a BD if it is not acting as an investment advisor?

no

does the exchange or name of the market maker who executed the order need to be on the order ticket?

no

does the price at time order is received need to be on the order ticket?

no

if a person is required to be registered at the federal level, will they need to be registered at the state level?

no

is a registered investment adviser automatically considered an accredited investor under the '33 Act?

no

is converting a bond to a stock considered a sale?

no

would a decrease in demand for real estate be advantageous to REITs?

no

does a cash flow statement itemize assets, liabilities, or insurance cash values?

no sees if client is living within their means

is it considered an offer when a newspaper or other publication is not published in a state, but is sold in a state?

no the Wall Street Journal is published in one state, but is sold throughout the whole US

risk that changes in government activity including, laws, rules. regulations. and tax rates in the US will have an adverse effect on investments

regulatory risks

Administrator may by rule adopt exemptions from registration requirements if exemptions are consistent with public interest and purposes fairly intended by the policy and provisions of the act. Administrator may revoke or deny certain exemptions. Does the Administrator have to give prior notice to those who were previously exempt and to other regulators?

no - without prior notice the Admin can revoke or deny certain exemptions

Roth IRA - is there an age limit to making contribs to IRA? - what age do you have to be to make a catch-up? - are contribs tax deductible ? - To be a qualified distribution what do you have to do?

no age limit - 50 - 5 yr holding period & meet one of following 1. made after Roth IRA is 59.5 2. made as a result of the death or disability of Roth IRA owner 3. used for qualified 1st time home buyer expenses 4. used for edu expenses 5. used for medical insurance premiums

is the market price of an investment included in the NPV calculation?

no because NPV is attempting to assign a present value to the investment which can then be compared to the market price to determine if the investment will be profitable

is a fixed annuity offered by an insurance company subject to the anti-fraud provisions of securities law?

no because fixed annuities are not securities

is an issuer negotiating with an underwriter an offer to sell under the '33 Act?

no because not dealing with the public

can an advisor be paid on the basis of capital gains or capital appreciation?

no can only be paid on total value averaged over defined period

does a no-load fund charge fees?

no front or back end fees but can still charge purchase fees, exchange fees, account fees, and redemption fees

BDs must furnish a final prospectus to customers purchasing securities of a new issue when?

no later than transaction confirmation due date

equity indexed annuities participation rates if the index goes down by 5%, with a 10% participation rate what happens to the investors equity indexed annuity?

no matter the participation rate, the investor's equity indexed annuity does not see a decrease in principal

what is the mode for a series of numbers if no number repeats in a set of numbers? what is the mode for a series of numbers if more than one number repeats itself?

no mode there can be more than one mode

Should you invest in tax-exempt securities in your IRA?

no there is no benefit since IRA earnings are tax deferred or tax exempt so shouldn't invest in muni bonds or muni bond funds

is principal guaranteed with ETNs?

no, return of principal is not guaranteed

do administrators file registration?

no. registration is reviewed by Administrators but the firms and individuals do the filing

permanent life insurance policy - does not pay dividends

non-participating

contract between individual and their employer to defer compensation as agreed upon between the 2 parties

non-qualified deferred compensation plan

payroll deduction plans are qualified or non qualified plans typically?

nonqualified

what is recharacterization and is it allowed?

not allowed basically have until due date of their tax return for the yr that contribution was made to recharacterize Roth IRA into another IRA

If an individual has previously declared bankruptcy is this grounds for denying from becoming an IAR?

not grounds for registration denial

Exempt transactions: Private Placements sold to ___________________ during a _____________ period

not more than 10 persons other than institutional investors 12-month

Can options be bought on margin or in a margin account?

not on margin yes in a margin account

Are IAs allowed to take custody of client's funds or securities?

not unless the IA has notified the Admin of custody and the Admin has not prohibited this practice

Can a BD ever share in client profits or losses in regards to the NASAA rule?

not unless they have written authorization from the client and the BD (doesn't need to be proportional)

If an IA is required to register with the SEC, they will not have to "register" with the State but may be required to make a ___________

notice filing of their Form ADV with the state

type of technical analysis for stock, trades of less than 100 shares

odd lot purchases and sales

one account that contains the accounts of many SEC rules apply

omnibus account

Regulated Investment Companies are exempt from

paying tax on dividends which are distributed

where do commodities trade?

on an exchange

if a corporation experiences any extraordinary items or expenses, where would this be reflected?

on the investor's income statement

if you use a 1035 tax-fee exchange for replacing an old insurance life insurance policy, how often are you allowed to do this?

once every 3 years

married but filing separately may result in less tax than filing a joint return if

one spouse has significantly higher income than the other spouse

Private CMOs are backed by what?

only backed by the issuer of the product not by any government guarantee

If a radio or TV signal is broadcast and directed to Tennessee, but the signal can be received and viewed in Texas, then what state(s) is the signal considered to be an offer?

only considered an offer in the state where it originated and is directed (Tennessee) not considered an offer in Texas, but could be considered a "solicitation" in states other than Tennessee

guarantees in variable-universal life

only guarantee is the Rate of Mortality

is an IA allowed to charge an advisory fee and a commission?

only if they disclose it in writing BEFORE any advice is rendered

If an IA has offices in multiple states Then the IA has to be compliant with the Minimum Net Worth requirements needed in every state or where?

only need a minimum net worth requirement in the state its principal place of business is

IARS do not have to register if they

only sell fixed annuities/life insurance products because these fixed products are not considered securities

must redeem an investor's shares on demand at the current net asset value which is calculated daily and may be the same as, higher, or lower than the price paid

open end investment companies

If a Coverdell account is owned by the student, it will have a (high/low) impact on financial aid eligibility? If owned by the parent, it will have a (high/low) impact on financial aid eligibility Do qualified distributions from a Coverdell account count as income in the FAFSA?

owned by student = high impact owned by parent = low impact NO dont count

formula for common shares received upon conversion

par value/conversion price = common shrs received

permanent life insurance policy - one that pays dividends to the policyholder. - dividends can be used to reduce the premium

participating policy

Form of asset allocation where the portfolio is set and is re-balanced at pre-determined intervals

passive asset allocation

equity indexed annuity while most commonly calculated annually, some employe ____________ valuation method.

point-to-point

risk that an investment's returns could suffer as a result of political changes or instability in a country

political or country risk

If Agents of BDs, BDs, or IA Firms (not IARs) are going to have custody or discretion over their clients' assets, the USA provides that a State Administrator may require them to do what

post surety bonds aka fidelity bonds

direct investments in real estate Raw Land: only upside =

potential LT Capital Gain if property value increases

passes the assets of the creator of the will into an existing trust that was created by the writer of the will

pour-over will

pre-tax margin =

pre-tax profit/ sales

529 plan that allows anyone to establish account in name of student and lock in the cost of a specific number of academic periods or units at CURRENT PRICES but the units or periods will be used in the future

prepaid tuition plan

Main Purpose of Chinese Wall

prevent material, non-public information from being shared between departments within a BD, thereby promoting confidentiality and trust with the investing public

real estate investors make money from ___________ & ____________. Real estate can provide leverage to investor bc most conventional mortgages only require ____________% down

price appreciation & rental income - 25% down

what is referred to as the multiple at which stock is selling?

price earnings ratio

bond bought at par

price is equal to par =$1000

bond bought at premium

price is greater than par>$1000

bond bought at discount

price is less than par <$1000

Trade futures contracts to protect against what?

price movements in your commodity

ratio is often used by money managers to determine whether a stock is undervalued or overvalued

price to book ratio

Risks or disadvantages in investing in precious metals:

price volatility discovery of new metal reserves if investor purchase bars , that investment must be kept in safe place

Variable part of the Futures Contract is what?

price, based on the market price of commodity

Amex Major Market Index (MMI) is ____________ average of ___________ ___________________stocks?

price-weighted average of 20 blue chip industrial stocks

fee that some funds charge investors when they purchase fund shares and is separate from front-end sales load because it is paid to the fund, not the broker

purchase fee

a form of registration used for NEW ISSUE of securities not registered with SEC but state of issuance only

qualification

small company making intrastate offering is an example of coordination, filing, or qualification?

qualification

type of analysis that focuses on hard data only like revenues, margins, profits, and assets in order to determine the value of a stock

quantitative analysis

10-Q form - submitted when? - required to disclose relevant info regarding their _______________

quarterly financial position

short term bonds react the ___________ to interest rate changes

quickest

changing the discount rate: rate charged to member banks which borrow from the Fed to cover temporary reserve needs rate is __________ to slow the economy

raised

who is eligible to participate in a Keogh Plan?

recipients of income from self-employment and their full-time employees if they : 1. are 21 yrs old 2. have worked at least 1 yr for the company 3. work 1,000 hours per year

Mutual Funds Investment Income or Dividends - what happens to the NAV when dividends are distributed

reduce the NAV on the ex-date

annuity payout option if the income payments of the annuitant do not equal the premium paid, the balance of the account is paid to a beneficiary of the annuity either in payments or in a lump sum

refund annuity

any person (IA, IAR, BD, or Agent) may avoid civil liability by offering what prior to the filing of a lawsuit.

refund of purchase price plus interest

Pay to Play rule applies to

registered advisers and advisers covered under the Private Adviser Exemption

what happens when registering by coordination?

registration is filed with SEC and simultaneous duplicate copies of registration are filed with BOTH State and Federal

if an agent or IAR leaves employment at a firm and does not transfer to another firm, what happens to the registration of the agent or IAR? How many years until they have to retake exams?

registration is not effective when the agent or IAR is not employed by a registered firm 2 years

Mutual Funds Investment Income or Dividends - if reinvest dividends, how will they be reinvested?

reinvested at the Public Offering Price or less depending on the fund - could charge investors a sales load if they wanted to

risk that interest and dividend income from existing investments may not be able to be reinvested in a way that will earn the same rate of return

reinvestment risk

benchmarking when creating a customized benchmark for a specific client, the portfolio manager must provide _________________________________ which reflect the portfolio's investment objective

relevant and obtainable alternatives

what happens if you have one life insurance policy and want a different one ?

replacing a policy is permitted but highly regulated

investors who open cash accounts must pay for all of their trades by when?

settlement date

capitalization formula = what is it also referred to as?

shareholders' Equity + Bonds "Total Capital"

Insiders cannot sell shares of their own company stock ______ or ____________. An owner of _____________ of the stock of a company is considered to be a principal stockholder (insider)

short or short against the box 10% or more

a will that handles the outright distribution of one person's assets to beneficiaries named in the will

simple will

if 10 investors participate in intrastate offerings of corporate securities would they need to register under the USA

since its not more than 10, no

accumulated depreciation is (added/subtracted) from the value of depreciable assets like buildings and equipment in the fixed asset section of the balance sheet

subtracted

risk common to all securities of the same general asset class (stocks, bonds) - cannot be minimized or eliminated with diversification with the same asset class. Includes general market forces and sentiment

systematic risk

market risk interest rate risk and inflation risks are categorized as what?

systematic risks

focuses on short-term asset mix. There are targeted balances but adjustments can be and are made within a range based on current market and economic conditions

tactical asset allocation

is active allocation a form of tactical allocation or is tactical allocation na form of active allocation

tactical is a form of active

how do earnings accumulate for qualified and non-qualified annuities?

tax deferred basis

IRA - taxed how? - account for who? - Is an IRA itself an investment?

tax deferred so pay with before tax dollars account for individuals who are employed and their spouses no it is a container which an individual can keep their investments in

lump sum payments for death benefit of life insurance policies are generally taxed how to the beneficiary? what if the policy had been sold to a 3rd part prior to death?

tax exempt to the beneficiary but may be taxable under the transfer for value rule if the policy had been sold to a 3rd party prior to death

EPS would be increased by - tax (loss/gain) carried forward - (reduction/increase) of corporate income tax rates - (retirement/issue) of bonds

tax loss carried forward reduction of corporate income tax rates retirement of outstanding bonds

after registration becomes effective, the registration statement may only be amended to change ? A. public offering price B. syndicate compensation arrangements C. the amount of securities to be offered or sold

the amount of securities to be offered or sold A and B CANNOT BE AMENDED

concept states that value of a $ today will be higher than the value of that same $ in the future because of inflation and potential appreciation or income received from investing that $

time value of Money

this type of insurance policy allows the holder, at certain times stated in the policy, to "adjust" the amount of premium and the amount of the DB

universal life or adjustable life insurance

are listed or unlisted products considered to be more risky

unlisted = riskier bc more difficult to sell bc no market readily available

OTC market trades what type of securities? who trades these securities in the OTC market? OTC NASDAQ market is what type of market?

unlisted securities market makers from own inventory negotiated market

A buyer of securities in a private placement receives _____ securities

unregistered

the administrator may by order deny, suspend, or revoke any registration or bar or censure any registrant from employment if he finds that it is in the public interest and the the applicant/registrant has willfully violated the law of a foreign jurisdiction when?

within the past 5 years

advisory program under which a specified fee or fees not based directly upon transactions in a client's account is charged for investment advisory services (may include portfolio management or advice concerning the selection of other IAs) and the execution of client transactions

wrap fee program

investment advisers cannot place an order for a client based on 3rd party instruction without _______

written 3rd party trading authorization

state replacement requirements for replacing a life insurance policy with a new one include:

written comparison of the new and old policies covering policy provisions such as the suicide clause, incontestability clause, and the conversion period

It is unlawful for any person who receives, directly or indirectly, any consideration for advising others as to the value of securities, or their purchase or sale to act as principal for their own account (to knowingly sell to or purchase any security from a client) without __________________ when?

written disclosure to client before completing the transaction - client must consent but doesn't have to be in writing

manager tenure is the length of time in __________ that a person has been a portfolio manager of a fund

years

403 B rollovers - is an employer ever allowed to deny a rollover?

yes

if a BD or an IA becomes registered, does this registration automatically constitute registration of any agent/IAR who is a partner, officer, or director?

yes

if an agent tells a customer that the agent cannot make an offer to sell a specific security but can accept an offer from the customer to buy that security, is this considered an offer by the agent to the customer?

yes

is a certificate of interest in oil, gas, or mining titles or leases defined as a security under the Uniform Securities Act?

yes

is receiving a security as a bonus for buying another security or product considered a sale?

yes

is receiving rights or warrants to buy another security considered a sale?

yes

- can a stop order protect a profit on an existing position? - can a stop order limit a loss on an existing position? - can a stop order assure a specific price execution?

yes yes no

Rollovers: - Can distributions from a SIMPLE IRA be rolled over into other types of retirement plans?

yes after the employee has participated in the plan for at least 2 years - distribs in 1st 2 years can only be rolled over to another SIMPLE IRA

are performance fees allowed in a private fund?

yes as long as all investors are "Qualified Clients"

is a Canadian BD permitted to contact a snowbird or those on vacation in the US?

yes as long as there was an established BD relationship with the client before the client traveled to the US

Is an IA allowed to exercise voting authority with respect to a client's securities? IA Act of 1940

yes as long as they 1) have written policies and procedures so that they act in client's best interest 2) disclose to clients that they can see info on how the IA voted 3) upon client's request, furnish copy of IA's policies and procedures

is receiving a "gift" of assessable stock considered a sale?

yes because the owner would no longer be liable for future assessments (received "value") by gifting the stock

If you are an IA that discusses life insurance with their clients are they regulated under the IA act?

yes because they are still an IA

can a customer and an agent of a BD open a joint account?

yes but must agree in writing and have the written authorization of the BD

Does the IA Act of 1940 allow performance based fees?

yes but only for Qualified Clients : net worth of 2.2 million or 1.1 million in AUM

is it okay for an investment advisor to distribute a 3rd party research report to a client?

yes but the IA has to disclose that its a 3rd party research report

do you have to register as an agent if you are conducting transactions with insurance company securities and federal savings and loans securities?

yes but you do not have to register them with the state

if have a place of business in that state, do you need to register?

yes in that state unless already registered with SEC or exempt from registration

Are options available on ETFs?

yes on most

after in place, can the client revoke consent for an agent cross transaction?

yes upon WRITTEN notice

if the owner of an IRA dies and the designated beneficiary is: a trust - can the trust become owner of account? - what is the maximum payout period based on?

yes, trust becomes owner and the beneficiaries of the trust become the beneficiaries of the IRA - maximum payout is based on the OLDEST beneficiary's age

Investment Act of 1940: If an IA is acting as a BD in any capacity, do they need to notify the client?

yes. must disclose in writing that acting as a BD BEFORE completion of the transaction and must obtain WRITTEN CONSENT of the client for the transaction different than the USA rule bc in USA you dont have to have written consent from a client

long-term yield on a bond that is expressed as an annual rat

yield to maturity or basis


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