Series 65 Questions
What are the two types of ADRs?
Emerging and developed
What are the requirements to be eligible for a Keogh?
F - fulltime A - age 21 to 70.5 T - tenured (1+ years at company)
Who determines the ex-dividend date in a dividend disbursement?
FINRA
Who regulates the over the counter market?
FINRA
What type of order has the highest priority?
Market order
If an investor is seeking safety and liquidity, what type of fund would you recommend?
Money market fund
What are some cons to investing in REITS? (real estate investment trusts)
investor has no control loans can be risky dividends are taxed as full ordinary income
If an investor is seeking income and is in a high tax bracket, what type of fund would you recommend?
Municipal bond fund
How is pricing determined for a closed management investment company?
NAV + supply/demand
Who regulates the exchange market?
NYSE
Do REITs (real estate investment trusts) have direct participation?
No losses do not pass through
What is the relationship between interest rates and bond prices?
Opposite as interest rates rise, bond prices fall
How is the front-end load calculated?
POP - NAV
How is pricing determined for an open management investment company?
POP = NAV + sales charges
Does the participant or the sponsor assume the risk in a defined contribution plan?
Participant
____% preferred
annual dividend / par value
Calculation for current yield of a bond
annual interest / current price
What type of annuity payout option gives the largest payments?
life/straight/pure
What are disadvantages to investing in a direct participation plan?
liquidity risk legislative risk increased risk of being audited by IRS
In a bullish market, what types of derivatives would you want?
long call short put
What is the goal of foreign stock funds?
long term capital appreciation
What are some cons to convertable bond?
lower interest rate may be called before ready to convert potential dilution (stock split or dividend)
Reg T determines the amount for which minimum for margin accounts?
margin call - what the client must pay
SROs determines the amount for which minimum for margin accounts?
margin maintenance - min level of equity in account
How do you calculate the price per share needed for parity?
market price / convertable shares
What does an asset allocation fund contain that a balanced fund does not?
money market
If someone inherits an IRA from someone other than their spouse, what are their options?
must take RMD within a year (no 10% penalty) or entire over 5 years can't rollover into their own IRA
Why would someone choose to invest in treasure securities?
no credit risk highly liquid no state income tax
What are some pros to investing in REITs? (Real estate investment trusts)
opportunity to invest in real estate REITS move opposite stock market (diversification) income/capital appreciation
What is the relationship between a bond's rating and yield?
opposite the higher the rating, the lower the yield (less risk)
What is a general obligation bond levied against?
the full property tax value (muni bond) backed by issuer's full faith and credit
Who carries the risk in a fixed annuity?
the insurance company
What is a rights offering?
the opportunity to purchase common stock below the market price options: exercise right, sell right, allow right to expire
How many shares are in one option?
100
What is the highest quality rating by Standard and Poor?
AAA
What is the highest quality rating by Moody's?
Aaa
What type of preferred stock is the worst for those seeking income?
Adjustable rate tied to a benchmark rate
How does portfolio turnover effect the expense ratio?
If a fund is held for a shorter period of time, it will be taxed as short term gains and therefor have a higher expense ratio
What is a eurodollar?
US dollars deposited in banks outside of the US
What type(s) of insurance has varying interest?
Universal life
What type(s) of insurance has flexible premiums?
Universal variable life
When does forward pricing come in to play?
When a mutual fund is being sold, it is sold at the next calculated NAV before 4pm: same day NAV after 4pm: next day NAV
What type(s) of insurance always has at least some guaranteed death benefit?
Whole and variable
From what type(s) of insurance can you take policy loans?
Whole, variable and universal
How is money made with closed end companies?
agency transaction: brokerage commission principal transaction: markup or markdown
What does a broker act as and how do they get paid
agent, commissions
Do more conservative or more aggressive funds have higher expense ratios?
aggressive funds
What are ineligible investments for a retirement account?
collectibles whole life term life
What type of educational savings plan has the highest contribution limits?
college savings plan - type of 529
What is the importance of par value in relation to common stock, preferred stock and bonds?
common stock - doesn't matter preferred stock - basis of dividend bond - basis of interest payment and the amount to be repayed
Yield spread
difference on yields with the same maturity but different ratings widens in poor economic conditions
guaranteed bonds
different entity backs debt, often by parent company
What are some pros to convertable bond?
downside protection, investor is a creditor upside potential, bond parallels risking stock price
What type of secondary market has auction style bidding?
exchange market
How is the expense ratio calculated?
expenses / average net assets
How is a bond's interest payment calculated?
face value x nominal yield
What is a treasury inflation protection security? (TIPS)
fixed rate (% of par value) coupon par value adjusted for inflation sold at lower rates
Rank bonds in order of most safe to least
government general obligation (municipal) revenue bonds
The broker/dealer sets which minimum amount for margin accounts?
house maintenance - stricter limit
Where is the custodian bank located when referring to an ADR?
in the issuers country
Primary objective of preferred stock
income
If an investor is seeking aggressive growth, where would you recommend they invest?
small cap
Who is a zero-coupon bond best for?
someone with targeted goals
Who can contribute to a section 457 plan?
state employees and some tax exempt (not including churches)
How can you calculate if a taxed investment can beat a tax free investment?
tax free yield / (100% - tax bracket)
What is the basis for determining payments for a variable annuity
the assumed interest rate annuitants age and life expectancy
What is a revenue bond levied against?
the entity's revenue generated
How is market cap calculated?
# outstanding common stock x current market price per share
What is the lowest amount you can get a negotiable certificate of deposit?
$100,000
What is the minimum needed to invest in GNMA?
$25,000
When is an investment management company diversified?
75% or more is outside company and affiliates 5% or less in any one corporations securities 10% or less of outside common stock
What is the maximum sales charge allowed?
8.5% POP
If an owner of a tenants in common account dies, where does the money go?
Beneficiary
What does it mean if a company decides to use "refunding" in relation to their bond?
Bond prices have gone down, so they will issue new bonds at a lower rate and use the proceeds to buy back old bonds
What type of preferred stock has the lowest rate?
Convertable can trade for number of common stock price fluctuates with common stock
What is the difference between Fannie Mae and Ginnie Mae?
Fannie: individual investors, backed by real estate mortgages Ginnie: pool of investors, backed by federal government
What is the relationship between limited and general partners in a direct participation program?
General partner acts as fiduciary for limited partner
Who are the two parties of a direct participation plan?
General partner(s) (active investor(s)) Limited partner(s) (passive investor(s))
What type of fund focuses on capital gains?
Growth funds
Employee stock options
Hired => [vesting period] => exercise option @ strike price
How long does it take for funds to vest in a SEP IRA?
Immediately
What conditions must be met in order to qualify for the Safe Harbor Provision as a fiduciary?
Investment selection (3+) Investment control (employees can pick) All required communications
What is a top heavy plan?
Key employees get more (tested annually)
What is the most widely used benchmark for short term interest rates?
LIBOR
How many can invest in a hedge fund?
Less than 100 accredited investors
If you bought the right to sell, what type of position do you have?
Long put
What is a eurobond?
Long term debt instrument issued outside the country of its denominated currency
How is a bond's current yield calculated?
Return (interest payment) / investment (market value)
When referring to an ADR, who(m) is the registered owner?
US bank
What is the yield to maturity of a bond?
The gain or loss an investor will have if they hold until maturity
What is a warrant?
The right to purchase at a certain price (usually above today's market price) at a future point in time long term instrument usually used as a sweetener
Cumulative preferred stock is best for who?
Those seeking income paid for missed dividends
What is usually better - rollover or transfer?
Transfer, no with holding or time limit
How are variable annuities regulated?
as insurance and securities
collateral trust bond
back by securities security rating and bond rating rise together
debenture
backed by credit worthiness
Mortgage bond
backed by real estate market value ALWAYS less than principal
What does a customer receive for selling a security on the secondary market?
bid price
How is the spread calculated?
bid-ask
What type of preferred stock pays the highest rate?
callable company can buy back
Incentive stock option
can count as long term gains must be held for 2 years after granting of option must be held for 1 year after exercise date
If you buy a bond at a premium, which is higher: coupon or rate of return?
coupon pay more, you get less
Rank claims as most senior to least (stockholder, creditor, debenture)
creditor debenture stockholder
Nonqualified stock option
current market price - strike price = employee wage taxed as income for employee, tax deduction for company
What type of bond is paid out last?
debenture
What date(s) does the board of directors decide in a dividend disbursement
declaration date record date payable date
What does a dealer act as and how do they get paid
principal, profit
When would you want to buy a stop order?
protect against loss in a short position protect a gain from a short position establish a long position when breakout above line of resistance
Who can contribute to a 403(b)
public school nonprofit church
You can take an early distribution with a penalty exception to purchase your first home in what type(s) of account?
qualified corp plans, 401k and simple (not traditional, roth or sep)
What type of real estate limited partnership is the most speculative?
raw land
What is the most common type of direct participation program?
real estate limited partnerships
If someone inherits their spouse's IRA, what are their options?
rollover to their own IRA continue to own as the beneficiary
What type of action profits from a decline in stock price?
selling short
What type of position has unlimited risk?
selling short
What are ineligible investment practices for a retirement account?
short sales of stock speculative option strategies margin account trading
Rank government securities from shortest term to longest
treasury bill (less than one year) us treasury note (2-10 years) treasury bond (10-30 years)
Equipment trust certificates
trust holds ownership market value NEVER less than principal
What type of annuity has a better chance of keeping pace with inflation?
variable
Rank claims on a company in order of most senior to subordinated
wages taxes secured bonds unsecured preferred stock common stock
What is the current yield of a bond?
what you will earn if you buy a bond and hold it for one year
What is a preemptive right?
when company issues more stock, you are given the option to buy more to maintain your same ownership % only app.lies to common stock
What type(s) of insurance has set premiums and lasts for life?
whole life
What variables determine the amount to be received in a defined benefit plan?
years of service average salary
