SERIES 65- PART 4

the difference between the exercise (or strike) price and the current market value is considered salary to the employee

Nonqualified stock option

Interest rate risk (least to most volatile)

-long term vs. short term (long term more v) -same maturity- (lower coupon more v) -zero coupon bonds- MOST VOLATILE

contains the terms of the loan including the method of computing interest on the borrowed monet

credit agreement

exercising an option: A for american means exercising it ____________, e for european means excerising it _______________

anytime, expiration date

a living trust deals with how ____________

assets are distributed

Stock prices in the stock exchange are considered at __________

auction

the higher the ___________ the greater the risk

beta

is the danger that a specific stock's price will be driven by factors largely independent of its issuer such as a severe market plunge

business risk

which of the following orders would be used to protect a short sale profit?

a buy stop

A _____________is not required to open a margin account for a trust

a completed margin suitability form

When an analyst adds back the current year's depreciation to the net income, she is computing the company's

cash flow from operations.

Investors looking to minimize the effects of taxation on their investments would probably receive the least benefit from-

CORPORATE BOND

The debt-to-equity ratio is computed by dividing the issuer's long-term debt by their total capitalization

DEBT TO EQUITY

the discount rate that, when applied to the cash flows of an investment, equates the net cash inflows to the net cash outflows

INTERNAL RATE OF RETURN

_________________ from the client authorizing a stated amount of a specified security is sufficient to place an order. An agent must receive authority to place orders for a client whether or not there is a conflict of interest. Written approval from the client authorizing a stated amount of a specified security is not required before placing the order. However, __________ is necessary for the agent to exercise discretion in the account.

Oral approval, written authority

we can determine an earnings rate by dividing 72 by the number of years it takes for money to double.

RULE OF 72

because futures and forwards are not securities, they do not come under jurisidction of the _____

SEC

Among the benefits of an HSA is funds not used for health expenses may be invested in mutual funds and other securities. (t/f)

TRUE

Class A shares have a front-end load, but a low- or no asset-based sales charge. Class B and C shares don't have a front-end load, but do have a higher asset-based sales charge. Class T shares always have a 12b-1 charge.

TRUE

Exempt securities must NOT reestablish their exemptions at least annually. (T/F)

TRUE

If a solicitation is made for something other than impersonal advisory services, the solicitor must receive a signed statement from the client verifying receipt of both the adviser's brochure and the solicitor's disclosure document at the time of, or before, entering into a contract and ascertain whether the solicitor has complied with the agreement.

TRUE

Only a court of competent jurisdiction has the power to issue an injunction. (T/F)

TRUE

Working capital =

WORKING CAPITAL = CURRENT ASSETS-CURRENT LIABILITIES

have an exercise price above the current market price have no relationship to an existing stockholders proportionate interest have a long expiration period, sometimes as much as 10 years or even longer USUALLY ATTACHED TO A BOND ISSUE

Warrant

a living will deals with _________________

end of life instructions

type of exchange traded debt security offering a return linked to a market index or other benchmark rather than periodic interest payments

etn

a is a direct commitment between one buyer and one seller. If the position is held until the closing date, the forward seller is obligated to make delivery; the forward buyer is obligated to take delivery not standardized direct obligations between buyer and seller not easily transferred and are considered illiquid risks credit and trustworthiness of the other

forward contarcts

evolved to eliminate the problem of funding a buyer or seller for an upcoming cash market transaction. they also reduce the price risk inherent in changing supply and demand relationships

forward contracts

quantity of commodity quality of comodity time of delivvery place for delivery price to be paid ar delievry

forward contracts

to offset, liquidate a futures position before delivery, an investor must complete a transaction opposite to the trade that initiated (opened) the futures position. e o setting transaction must occur in the same commodity, for the same delivery month, and on the same exchange

future offset

As prices change, gains or losses are computed daily for all open futures positions on the basis of each day's settlement price. Gains are credited and losses are debited for each open position, long or short. All accounts for firms and traders must be settled before the opening of trading on the next trading day.

futures contracts

contracts that are exchange traded obligations the buyer or seller is contingently responsible for the full value of the contract. A buyer goes long, or establishes a long position, and is obligated to take delivery of the commodity on the future date speci ed. A seller goes short, or establishes a short position, and is obligated to deliver the commodity on the speci ed future dat

futures contracts

gives permission to the broker-dealer to pledge a customer's margin securities as collateral

hypothecation agreement

___________ content may be reused by others

interactive

granting permission to the broker dealer to ledn out the customer's securities

loan consent agreement

Options buyers are _________ option sellers are ___________

long, short

Stock prices in the over the counter market are determined by__________

negotiation

only seller is obligated on an __________ contract

option

________ originate on the exchange_________and ___________ originate with the issuer of the stock

options, rights and warrants

the two most important factors influencing the price of a derivative are the ______________ of the underlying asset and the ______________of time until the contract expires

price movement, length

forwards are used by __________ thats why a lot of futures contracts never really end with delivert

producer

sometimes referred to as preemptive rights are a privilege extended to existing holders of a companys common stock always have an exercise price slightly below the current market price of the existing stock they limit the time in which you have to decide to exercise your right, usually no more than 45-60 days

rights

they are given not sold to existing holder of the common stock they are exercisable at a price below the current market they have a short lifespan-- they will expire in 45-60 days they can be sold and then the buyer can exercise them although genreally unwise to do, they can be left to expire

rights

Funds withdrawn for qualified education expenses are always free of federal income tax.l. The maximum contribution limits are determined on a state level.

section 529

The Securities exchange act of 1934 does not give SEC the power to __________

set margin requirements

For a CIP, ____________ is not required

sex

mutual funds cannot have _______

short stock

Stock received as an inheritance ALWAYS has a long term holding period even when the actual holding period is _________ taxed as long term capital gains

short term

An exemption from registration under the Securities Act of 1933 is available to securities that are

sold only to persons resident in one state when the issuer is a resident doing business within that state

only _______ content needs preapproval

static

both ________ and ________ content may be editted by the originator

static and interactive

when an investor is not sure which direction the market will move but has a strong opinion there will be movement they buy A

straddle

are theoretical levels where the market supports the stock price (keeps it from falling below the stated level)

support level

beta is a measure of ___________risk

systemic

An investment adviser (IA) has a number of clients who need high-quality estate planning. These clients are referred to the Rox Law Firm, and in exchange, Mr. Rox sends those of his clients needing investment advice to the IA. The IA pays a referral fee to Mr. Rox of $300 for each referral who becomes a client. Under the NASAA Model Rule on Unethical Business Practices Of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers,

this is permissible, but only if disclosed to clients only if the fee is not based off of the size of the account, its a flat fee

Each option contract has three standardized items:

underlying asset expiration date exercise or strike price

When an investor writes an uncovered call (naked) the potential loss is ___________

unlimited

they are exerciseable at a price above the current market life is longer than rights and longer than call options as well when detached they can be traded like any other security do not have voting rights

warrants

When acting in the capacity of IA (or IAR), that is, when making recommendations or advising a client to purchase (or sell) a security, any transaction in which the firm is a PRINCIPAL requires disclosure in __________ to and consent (can be oral) from the client ________ to the completion of the trad

writing prior