ECONOMIC INDICATORS

Keynesians

advocate government intervention in the workings of the economy through increased government spending, which in turn increases aggregate demand.

Yield to maturity and coupon rate have

an inverse relationship. -That is, the higher the YTM and the coupon, the lower (shorter) the duration.

Yankee bonds

are foreign bonds, denominated in U.S. dollars and issued in the United States by foreign banks and corporations.

Eurobonds

are issued by a borrower in a foreign country, denominated in a currency other than one native to the issuer's country. Yankee bonds are a form of Eurobond,

ADRs

are issued in the U.S. by domestic banks and represent receipts for securities traded on foreign exchanges. are issued by a borrower in a foreign country, denominated in a currency other than one native to the issuer's country. Yankee bonds are a form of Eurobond, but that is not the best answer to this specific question.

Monetarists believe that

believe in economy handled by Federal reserve over fiscal policy(Keynesians)

No annuity payment is ever treated as a distribution of

capital gains.

Section 529 plan

considered a security

The Sharpe ratio measures a stock's

defined as a fund's excess return (fund's return exceeding the risk-free rate) divided by the total risk (standard deviation).

The Uniform Securities Act authorizes the state Administrator to require

either oral or written qualification examinations of investment adviser representatives and officers of investment adviser partnerships or corporations officers of investment advisers to pass a qualification examination an applicant for initial registration to publish an announcement of the application in one or more specified newspapers published in the state investment adviser representatives to pass a qualification examination

Savant Investment Managers (SIM) has a client with a short position in PQR common stock. The position was initiated at a price per share of $50, and with PQR currently selling at $30 per share, the client is interested in a method that will allow him to protect some of the unrealized profit without an expenditure of funds. His representative at SIM could suggest

entering a buy stop order at $35. -Buy stop orders, commonly referred to as "stop loss" orders are designed to halt a loss or protect a gain. These are buy orders placed above the current market that become triggered if it happens that the stock should trade at or through the specified stop price. Buying the call options would also offer the protection, but the question specified no expenditure of funds.

The semi-strong form of the EMH states that security prices

fully reflect all publicly-available information. This would include all historical information.

The NASAA Model Rule permits performance-based fees

if the client has at least $1.1 million in assets under management or a net worth in excess of $2.2 million, provided the compensation is based on gains and losses. -Unlike the Investment Advisers Act of 1940, under the NASAA Model Rule, state-registered advisers must make additional disclosures, including the incentive to take additional risk.

The present value of a dollar

indicates how much needs to be invested today at a given interest rate to equal a specific cash value in the future

The 4 primary requirements of the CIP are the

individual client's name, physical address, DOB, and SSN.

Yield to maturity and coupon rate have an

inverse relationship. -That is, the higher the YTM and the coupon, the lower (shorter) the duration.

Beta

is a measure of relative systematic risk for stock or portfolio returns..

A unit investment trust (UIT)

is a type of investment company whose units are sold in the secondary market and is generally unmanaged, or passively managed. The trust manager initially selects the securities to be included in the portfolio and then holds those securities until they mature or the UIT terminates.

Inertial inflation

is an economic condition where the rate of price increases reaches a stable equilibrium and stays there until a shock to the system occurs, at which time, the rate of inflation changes.

Anchoring

is making irrational decisions based on information that should have no influence on the decision at hand.

Confirmation bias

is paying attention to information that supports a preconceived opinion and poorly made decision, while disregarding accurate, unsupportive information.

Regret aversion

is when the investor prepares herself in such a way as to avoid distress over an adverse outcome.

When the yield curve is positively sloped (and thus normal) ?

long-term bonds carry higher interest rates than short-term bonds of the same quality.

The weak form of the EMH states that security prices

relates to historical information only.

The strong form

relates to public and private (inside) information. One could conclude from this that both fundamental and technical analysis don't "work" in an efficient market.

A pattern of currency deposits designed to avoid currency reporting requirements is termed

structuring

Affinity fraud

targets members of identifiable groups, such as the elderly, or religious or ethnic communities

bottom-up approach.

the "micro" view of the economy

The longer the time to maturity,

the higher (longer) the duration.

Under the Uniform Securities Act, a registration statement for a security must be signed by

the issuer's chief executive officer, chief financial officer, and a majority of the issuer's board of directors

ERISA Section 404 (c) describes a safe harbor for 401(k) plan fiduciaries.

to provide at least 3 different investment alternatives with a range of risk and provide account access no less frequently than quarterly.

A living trust deals

with how assets are distributed and a durable power of attorney grants authorization to a person to legally act on behalf of someone who cannot do so.

the fund has had net redemptions over the past 6 months and asks you to explain how that might affect the fund's performance. You should explain that

1) performance will probably suffer because the fund's adviser will have to sell positions prematurely in order to meet redemption requests 2)many of the fund's expenses are relatively fixed so with less assets in the fund, the expense ratio will probably increase -When a fund has net redemptions, it means that less money is coming in than is going out. In order to meet those redemptions, the fund's manager will either have to sell securities that they planned to hold onto, or maintain more assets in cash (which generally will return less than other investments). Because the expense ratio is the annual expenses divided by the average annual assets, with less assets to cover the fixed expenses, the ratio will probably increase.

Nonagricultural employment

Coincident (or current)

Personal income, minus social security, veteran benefits, and welfare payments

Coincident (or current)

industrial production

Coincident (or current)

manufacturing and trade sales in constant dollars

Coincident (or current)

Commodity contracts are available on many different types of commodities. One of those types is precious metals. Included in the definition of a precious metal would be all of the following except

Diamonds are not a metal.

EDGAR stands for:

Electronic Data Gathering, Analysis, and Retrieval. -It is the easiest (and surely the fastest) way to obtain all of the financial information filed by reporting companies. It is available at SEC.gov.

the following types of business organizations do not protect owners' personal assets from losses incurred by the business?

General partnership & Sole proprietorship

This is known as the right of rescission.

In the case of an agent who mistakenly sells an unregistered, nonexempt security, broker-dealer should offer to buy back the security from the customer and pay the customer interest on the amount invested in the security for the period from the original purchase to the resale back to the firm, minus any income or profit realized by the client on the security.

Avg Prime Rate

Lagging Indicator

Avg. duration of employment

Lagging Indicator

Ratio of manufacturing and trade inventories to sales

Lagging Indicator

change in the index of labor cost per unit of output (manufacturing)

Lagging Indicator

change is the CPI for services

Lagging Indicator

ratio of consumer installment credit to personal income

Lagging Indicator

total amount of commercial & industrial loans outstanding

Lagging Indicator

Avg weekly initial claims for unemployment insurance

Leading

Avg. weekly hours in manufacturing

Leading

Building permits (housing starts)

Leading

Index for supplier deliveries - vendor performance

Leading

Index of Consumer Expectations

Leading

interest rate spread between 10-year treasury bond and the federal fund rate

Leading

manufacturers new orders for consumer goods

Leading

manufacturers new orders for non-defense capital goods

Leading

money supply

Leading

stock prices

Leading

Which of the following would be used to provide end-of-life instructions once a person becomes incapacitated?

Living will -The purpose of a living will is to give clear instructions regarding end-of-life decisions, such as organ donation or when to "pull the plug".

annuity vs. life insurance

One of the unique characteristics of an annuity (variable or fixed) is that it guarantees monthly payments for the life of the annuitant. Life insurance provides a death benefit, but not income.

NPV =

PV of CF − cost of investment)

prime rate

Rate of interest banks charge on short-term loans to their best customers - rises when the FRB increases the discount rate -decreases when the FRB decreases the discount rate

Among the differences between a Coverdell Education Savings Account and Section 529 plans are

The Coverdell may only be used by persons who fall within certain income limits—no such limits apply to the 529 plan. The Coverdell has contribution limits set by federal law; each state sets its own 529 limit. If the money is not used for education, it reverts back to the donor in a 529 plan but to the beneficiary in a Coverdell.

Under the NASAA Model Rule on Custody Requirements for Investment Advisers, an investment adviser who has custody of client securities or funds must do all of the following

The adviser must send clients quarterly, itemized statements listing the funds and securities in the adviser's custody at the end of the period and all transactions during the period. -The adviser must also arrange for an annual, surprise audit by an independent public accountant of client funds and securities. The adviser must notify the Administrator that the adviser has or may have custody of client securities or funds.(in writing)

The key word here is qualified!

The investment Juliette made was with pre-tax dollars, the money grows tax-deferred, and everything is taxed at distribution at ordinary income rates. Note: On the exam, all contributions to retirement plans are fully -deductible unless something in the question specifies otherwise.

Corporations have found that one way to increase employee motivation is to grant options to purchase stock in the company. Incentive (qualified) options differ from nonqualified options in all of the following respects

Whether the grant is of an ISO (qualified) or an NSO (nonqualified), there are no tax consequences to the recipient at the time of the grant. It is only after exercise (NSO) and sale after exercise (ISO) that the recipient of the grant has tax consequences. ISOs can only be granted to employees while the NSO can also be granted to members of the board of directors and even to vendors. With an ISO, capital gain (loss) treatment is available upon the sale of the stock if the recipient holds the stock purchased through exercise at least 1 year from the date of exercise and at least 2 years from the date of the grant. With an NSO, the recipient can only have ordinary income (loss) based on the difference between the exercise price and the market value when the option is exercised. Finally, if the recipient of an ISO does not exercise the option within 10 years of the grant, it is treated as an NSO for tax purposes.

A consent to service of process required by an Administrator is

a formal legal agreement whereby a registrant will be bound by a legal action or subpoena served on the Administrator as if it had been served on the registrant.

An investment adviser representative may describe dollar cost averaging to a customer as

a funding technique that will cause the average cost per share to be less than the average price per share

An individual investor specifies to her investment adviser representative that her portfolio must produce a minimum amount of cash each year. This would be considered

a liquidity constraint. -Liquidity constraints arise from an investor's need for spendable cash.