Series 66 - Unit 17

Which of the following would be considered a precious metal? A) Platinum B) Lead C) Copper D) Tin

A) Platinum Along with silver and gold, platinum is a commonly traded precious metal in the commodities markets

The returns on gold and other precious metals exhibit .

low correlation with stock and bond returns

Your client who owns a DPP that generated a $10,000 passive loss for the year could

only deduct the passive loss against passive income

most leveraged and inverse ETFs

reset daily

It would be correct to state that an inverse ETF

utilizes derivatives to achieve its objectives.

alternative investment (alts) examples

ETNs, Leveraged ETFs, and derivatives

viator

The buyer becomes the new owner of the life insurance policy, pays future premiums, and collects the death benefit when the insured dies. At one time, most viatical settlements were from people with a life-threatening illness. Now, individuals who are not facing a health crisis may sell their life insurance policies to get cash.

Alternative investments include four major categories:

real assets, hedge funds, private equity, and structured products

viatical settlement

the sale of a life insurance policy to a third party (the investor).

Corporations issue securities, primarily stocks and bonds, while limited partnerships issue

units representing the limited partner's interest in the venture

GPs

- make the decisions that bind the partnership - buys and sells property - manages the partnerhsip property and money - supervises all aspects - maintains a min 1% financial ints

A client with limited assets seeking additional income in retirement would probably find which of the following investment choices to be the least suitable? A) Treasury bonds B) ETFs C) ETNs D) Insured bank CDs

ETNs

Alternative assets are most often characterized by

inefficient pricing, providing potential abnormal returns or alpha returns.

DPPs

- one of the alt investments - limited partnership - allow flow-through to investors - pay no divs - pass income, giains, losses, deductionts and credits to investors

Being a limited partner in a direct participation program is analogous to being

a holder of common stock in a corporation.

DPPs are appropriate for investors who can

benefit from substantial tax deductions or credits, are not bothered by illiquidity, understand the business risks and benefits involved, and can stay in the program until completion.

Traditional investments include

cash, bonds, and stocks, regardless of the adjective used

Leveraged funds use

derivative products to generate the leverage, not bank borrowing

When a policy is sold through the life settlement process, the insured receives more than the cash value, but

less than the face amount of the policy.

Among the differences between an investment in a limited partnership offering and in a corporation is that

limited partnership offerings do not pay dividends; corporations do.

Because an exchange-traded fund is purchased and sold on an exchange, the rules generally applying to all exchange products, such as

purchasing them on margin, would apply.

A life settlement, involves

selling an existing life insurance policy for an amount in excess of the cash value, but less than the death benefit.

If the business operates at a loss, the limited partner's

share of that loss is treated as a passive loss on the investor's tax return.

Section 1031 permits a

tax-free exchange of one property for another. this has the effect of deferring any gain until final disposition of the property.

ETNs

- debt instruments - type of exchange traded debt security offering a return linked to a market index or other benchmark

investor who buys a LP must

complete and sign a subscription agrrement, which includes a statements of teh investors net worth and annual inc and a power of attorney form appointing the GP as agent of the partnership

When comparing active to passive real estate investing, the primary benefit to active is

control The investor determines what type of projects (e.g., single family home, apartment building, or commercial property) and then selects the specific property or properties.