FINAL EXAM REVIEW (65)
When can an agent share in commissions with another agent?
- agents are registered in the same states - same or affiliated B/D
What are the four tools used by the Federal Reserve to institute its monetary policy?
- discount rate - open market operations - reserve requirements - Reg. T (margin) requirements
According to the USA, what are considered sales?
- giving a security as a bonus - entering into a contract to sell a security
What is included in the investment policy statement (IPS)?
- methods of performance measurement - determination for meeting future cash flows
When must a B/D register?
- office in state - Solicits (mail) - clients (residents)
Which IRS forms are required for states and trusts?
1041
When does a state IA have to register?
<$100M AUM; must register in every state where office is maintained or conduct business
When must a federal IA register?
>$110M in AUM - SEC Only
When must an agent register?
B/D: accepts and places orders for securities Non-exempt: for those other than the employee
What do limit orders do?
BUY at a specific price
When do all registrations expire?
December 31
What does fundamental analysis equal?
Financials (ratios, historical earnings)
What are some coincident indicators?
GDP, value of good/services, unemployment rate
When NPV is equal to zero that typically means what?
It is a highly efficient market
If IRR is < required rate of return, what is NPV?
Negative
When does a state IAR not have to register?
No business in the state, no more than 5 clients in the state
When does a B/D NOT have to register?
No office AND: no clients, or clients are institutions or issuers
When does a state IA not have to register?
No office and no more than 5 clients in state, or institutions only
When does a federal IAR not have to register?
No office in state
When does a state IAR have to register?
Office in state and clients who are residents
Anytime an investment's IRR > required rate of return, the NPV is what?
Positive
If IRR > than required rate of return, what is NPV?
Positive
What happens when a loan from an insurance policy is not paid back?
Reduction of death benefit
What are all new offerings covered under?
Securities Act of 1933
What EMH states that future performance cannot be based upon historical data?
Strong form
What is the prime rate?
The rate a bank charges their best customers (inst.) on short-term borrowings
How do stop orders work?
They are triggered below limit price, then satisfied above it.
What is deemed a recession?
Two consecutive quarters of economic decline, as measured by GDP
When are RMDs required?
You must take distribution no later than April 1, the year after the year you turn 72
If IRR = the required rate of return, then what is NPV?
Zero
What does duration measure?
a bond's sensitivity to a change in interest rates
What is a market maker?
a broker/dealer who stands ready to buy or sell at least the standard unit of a specific stock traded in the over-the-counter market
A pooled investment with a share price generally different from its net asset value (NAV) per share is most likely what?
a closed-end fund
What happens if IRR is higher than anticipated?
a lower PV is required
What is the cost basis when inheriting stock?
a step-up to the market value at date of death
What are ADRs and who issues them?
allow US investors to invest indirectly in international companies; created and issued by domestic banks
When calculating YTC, what information is needed?
amount of interest payments to be received, the length of time to the call, the current price, and the call price
Under UGMA, when can a custodian re-register assets to the minor?
at legal age, determined by each state
When an analyst adds back the current year's depreciation to the net income, what is she computing?
cash flow from operations
When does an agent NOT have to regsiter?
clerical duties, silent partner, exempt issuers (municipal)
What does rebalancing require?
consistent allocation in different asset classes
Under Rule 144, who is subject to volume limitations?
control persons
How do you calculate the P/E ratio?
current market price per share and divided by the earnings per share
When computing YTM, what do we need to know?
current market price, the coupon (nominal yield), and the maturity date
How do you calculate equivalent taxable yield?
divide the tax-free yield by the compliment of the investors tax bracket
What is the most important consideration in investing in a LTD. Partnership?
economic viability
What are value stocks characterized by?
high dividends, stable earnings, low PE ratios
What are some lagging indicators?
inventory, duration of unemployment
A federal adviser is required to notice file within a state when?
maintains an office in the state OR has more than 5 clients in a state
What is beta?
measure of volatility versus the overall market
If below net capital requirement, when does IA need to provide full financial documents?
one business day after giving notice
What are the features of a tenancy in common (TIC) account?
predetermined ownership of assets, never avoids probate, assets will pass to their estate
What are technical investors interested in?
price and time of an investment based on stock chart features
What is the financial ratio used by some analysts to help determine if a company's stock is over or undervalued?
price-to-book ratio The higher the ratio, the greater premium the public is willing to pay over the theoretical liquidated value of the enterprise. Usually, a ratio of less than 1 indicates an undervalued company.
List two characteristics of ETFs
priced by supply and demand, designed to track an index
What do you need to determine the discounted cash flow of a bond?
principal, rate, and number of payments
When does a federal IA not have to register?
private adviser, foreign adviser, venture capital
What is the discount rate?
rate for Fed loans to banks
What is the federal funds rate?
rate for bank-to-bank loans
What are some leading indicators?
stock, s&p 500, unemployment claims
Which payout option from a nonqualified annuity would assure the largest monthly payout?
straight life
What is NPV?
the difference between the initial cash outflow and the present value of discounted cash flows
Where does a state IA need to meet financial requirements?
the state in which their principal office is located
What is market risk?
the uncertainty that the market price of a stock will drop even when earnings are strong
Why are index funds tax efficient?
they are passively managed; low management fees
What happens to assets in a JTWROS account?
they avoid probate
What happens to secured creditors if they have not been paid after liquidation?
they become general creditors
What do an S. corp and GP have in common?
they pass through profits and taxes to its owners - the business entity is not taxed
When does a federal IAR have to register?
w/ Admin in which I maintain an office
