Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Series 7 > 1st set > Flashcards

1st set Flashcards

You may prefer our related Brainscape-certified flashcards:
Series 7 Top-off Exam flashcards
1
Q

Can a corporation with no income pay dividends

A

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

When referring to bonds, if you see “7.3s of ‘37” what does that mean?

A

The bond has a coupon rate of 7.3% and it matures in the year 2037

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Is interest on corporate bonds fully taxed

A

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

When would a company issue income bonds

A

When it’s reorganizing and coming out of a bankruptcy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Are dividends on a municipal bond fund exempt from federal income tax?

A

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Under the conduit (or pipeline) theory of taxation, a fund is liable for taxes only on the income retained, provided it distributes at least ____% of its net investment income

A

90 %

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

When do income bonds pay interest

A

Income bonds only pay interest if the company declares a payment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Condemnation only applies to what kind of bonds

A

Revenue bonds

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Taxes on interest income from mortgage backed securities

A

Fully taxed

Mortgage backed get fully taxed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Taxes on interest income from US gov and agency securities

A

Usually interest income for US gov and agencies is only taxed at the federal level

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

CAV mean the the _____ of a bond

A

Cost basis

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

If someone dies in a tenants in common account, do the assets gets passed into the other person in the account

A

Nah

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

When do corporate bonds pay interest

A

Semi annually

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

When do Treasury bonds pay interest

A

Semi annually

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

When do utility stocks pay dividends

A

Quarterly

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Basis is a common synonym for _____

A

Yield to Maturity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Is a qualified distribution from a Roth IRA tax free?

A

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What makes a distribution from a Roth IRA a “Qualified distribution”

A

A qualified distribution is made after a five-year holding period and after the taxpayer has reached age 59½.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Are municipal notes part of the visible supply

A

No

Short-term notes are not part of the visible supply, which measures the dollar amount of new issues scheduled over the coming month.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Days used for calculating accrued interest on Muni bonds

A

30 day month

360 day year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

If a customer purchases the same stock that he just sold for a loss within 30 days, is the loss deductible?

A

No

If he repurchased the same shares that he took a loss on within in 30 days the loss is disallowed under the wash sale rule

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

The bond resolution includes all covenants between ____

A

The issuer and the trustee acting for the bondholders.

The bond resolution describes not only the characteristics of the proposed offering, but also the obligations the issuer has to its bondholders.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

The City of Columbus issued a 20-year general obligation bond at a price of 50. An original purchaser sold the bond at 75 after holding it for 7 years. For tax purposes, that sale generated

A

The customer has realized a capital gain of $75. Original issue discount bonds must accrete the discount over the life of the bond. In this example, the amount of the discount (par value minus purchase price) is $500 ($1,000 − $500 = $500). The discount divided by the number of years to maturity determines the annual accretion added to the cost basis. In this question, the annual accretion is $25 ($500 divided by 20 = $25). The adjusted cost basis would be the original purchase price ($500) plus seven years of accretion (7 times $25 = $175) for a total of $675. Because the proceeds of the sale were $750, the customer has realized a capital gain of $75 ($750 − $675 = $75).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Is the effective date (date the SEC releases the securities for sale) found in the preliminary prospectus?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

A deed of trust is another name for what?

A

An indenture on a debt security

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Formula for current yield on a bond

A

Annual interest payment / current market price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is tax equivalent yield useful for

A

Seeing how much yield a taxable bond (like a corporate bond) would have to yield to be equivalent to tax free interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Formula for computing tax equivalent yield

A

Nominal yield ÷ (1 − income tax rate)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Would the tax equivalent yield on a muni bond be higher or lower than its nominal yield

A

The tax equivalent yield would be higher

A higher percentage

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

For taxes on capital gains distributions from mutual funds, is the holding period determined by how long the investor held the mutual fund shares or how long the mutual fund held the securities

A

How long the mutual fund held the securities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

At settlement, does accrued interest increase or decrease the amount a buyer must pay

A

Accrued interest increases the amount the buyer must pay

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

What is the average holding period for securities in a portfolio with a 25% turnover ratio

A

Four years

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Non recourse debt

A

Loan secured by collateral (usually real property) but for which the borrower is not personally liable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Does recourse debt increase basis in a DPP?

A

Yes

Recourse debt increases basis in any DPP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Does non-recourse debt increase basis in a real estate limited partnership (RELP)

A

Yes

So if an investor bought a unit of a RELP for $20k, and his allocable share NR debt was $50k. His cost basis would be increased to $70k

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

Do distributions in a RELP add to or reduce from basis

A

Distributions reduce basis

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

The Bond Buyer 20-Bond Index uses what in its index?

A

The average yield of 20 general obligation bonds w/ a rating of A or better and a maturity of 20 years

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

What is the rating of bonds that are included in the 11 Bond index

A

Bonds that have a rating of AAA and AA are included in the 11-Bond Index.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

What kind of bond yields are reported in the Revdex 25 index

A

Revenue bond yields are reported in the Revdex 25.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

What is the maturity of bonds reported in the Revdex index

A

30 years

But remember it’s the yields that are reported. Not the average maturity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

Is a quote on a municipal security between dealers allowed to be a non-firm quote?

A

No.

Quotes between dealers are required to be bond fide, or firm, quotes.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

What are the two things that make up a municipal issuer’s Net Total Debt

A

Direct debt and overlapping debt constitute the municipality’s net total debt.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

What is the dated date on a municipal bond issue?

A

The date on which newly issued bonds begin to accrue interest

44
Q

Are certificates of participation (COP) considered revenue bonds

A

Yes

They are a form of municipal revenue bond

45
Q

In the case of default, can holders of a certificates of participation (COP) foreclose on the asset associated with the certificate?

A

Yes

46
Q

If a customer buys a new issue muni bond at a discount in the primary market, does the discount have to be accreted?

A

Yes

The discount must be accreted

47
Q

Many states offer tax benefits to residents who open 529 plans in their home state. In general, are these same benefits available when opening out of state plans

A

No

Usually STATE tax benefits are not available when opening out of state plans.

(Federal tax benefits are available regardless of what state a plan as opened in)

48
Q

CMO

A

Collateralized morgatage obligation

A bond that slices mortgage pools up into tranches based on risk, rewards or maturities

49
Q

Are T bills purchased at a discount?

A

Yes

50
Q

Can Nasdaq securities trade in the OTC market?

A

Yes

51
Q

What does the Bond Placement Ratio measure?

A

The percentage of new muni bonds offered last week that were sold last week

52
Q

What is the basis for stock that was inherited after someone dies

A

The costs basis is the fair market value of the stock on the date the descendent died

53
Q

What class of shares do breakpoints apply to?

A

Breakpoints apply to class A shares only

Contingent deferred sales charge applies to Class B & Class C shares

54
Q

Is the underwriter of a new issue responsible for filing the registration statements?

A

No

The issuer is ultimately responsible

55
Q

During the order period of a municipal underwriting, would the manager of the syndicate consider time of submission when accepting/allocating orders?

A

No

56
Q

What is the Order Period in a muni bond underwriting?

A

A short time following the award of a municipal issue to the winning syndicate.

During the order period, orders for an issue of muni bonds are allocated in accordance with the priority defined in the syndicate letter. (Not a first-come, first-served basis)

57
Q

Are REITs flow-through vehicles?

A

No

58
Q

If a REIT owns depreciable property, who will take the deduction: the REIT or the investor

A

The REIT will take the deduction, not the investor

59
Q

For a CREDIT calendar spread, what expirations are you buying/selling

A

But near term expiration

Sell long term expiration

60
Q

Are GNMA securities directly backed by the federal gov?

A

Yes

61
Q

Is the underwriter of a new issue responsible for distributing the securities to the public?

A

Yes

62
Q

Would mortgages likely be used to back a collateralized debt obligation (CDO)?

A

No

Unlike CMOs, which are backed by mortgages, CDOs are invariably backed by some other form of asset.

63
Q

Max deduction of net capital losses against other income in 1 year

A

The maximum deduction of net capital losses against other income in any one year is $3,000

64
Q

Does a DPP pay federal income taxes?

A

No

65
Q

Are Public Housing Authority bonds (PHAs) backed by the full faith and credit of the us gov?

A

Yes

66
Q

Is prospectus filing a requirement of the Securities Exchange Act of 1934 or Securities Act of 1933?

A

Prospectus filing is a requirement of the Securities Act of 1933.

67
Q

Would an oil and gas income program or oil and gas exploration program have more risk

A

The exploration program would have more risk

68
Q

Do The Federal National Mortgage Association (FNMA) securities trade OTC?

A

Yes

69
Q

Do mutual funds that reinvest dividends and capital gains do so at the public offering price or NAV?

A

Mutual funds that offer automatic reinvestment of dividends and gains distributions must do so at net asset value.

70
Q

What’s the rating of bond in the bond buyers 20 index

A

A or better

71
Q

What makes a sales charge a front end load

A

The sales charge comes off the amount invested.

72
Q

When there might be a wash trade, what are 3 things looked at to see if the bonds were too similar?

A

In judging whether bonds are substantially identical to bonds sold for a loss, the tax code considers:

Maturity
Issuer
Coupon rate

73
Q

Are discounts on an original issue of bonds accredited?

A

Yes

74
Q

When investors buy or sell mutual funds, at what price do they do so?

A

The buy/sell at the next computed NAV

So if an investor sold his mutual fund shares at 1:00pm, the price he receives would be the NAV as computed at the end of the day

75
Q

What is a married put?

A

Buy 100 shares of ABC at $50 per share and simultaneously buy one ABC 50 put

76
Q

When a bond is issued by a national government, it is referred to as ______

A

sovereign debt

77
Q

For section 529 plan, does the income level of the contributor affect the contribution amount?

A

No

Unlike Coverdell ESAs, income level of the contributor won’t effect the annual contribution amount

78
Q

How often can mutual funds distribute capital gains to shareholders?

A

Apparently, no more than once per year

79
Q

If falling interest rates & positive yield curve, what bond will appreciate more:

20-year bond selling at a discount
Or
20-year bond selling at a premium

A

20 year bond selling at a discount will appreciate more

80
Q

In a scenario of falling interest rates and a positive yield curve, what bond will appreciate more:

1 year bond
Or
20 year bond

A

The 20 year bond will appreciate more more

81
Q

When a bond issue is prefunded, how must the bonds be quoted?

A

They must be quoted in yield to call

82
Q

Interval fund

A

Closed end investment company where at certain intervals, investors can sell their shares back to the company for NAV

83
Q

When investors sell back shares to an interval fund, what amount do they receive?

A

Net Asset Value

pussy

84
Q

Is an interval fund open end or closed end?

A

Closed end investment company

85
Q

If a customer has a few options positions but doesn’t return the signed agreement within 15 days of acct approval, can they still choose to maintain or close out of existing positions?

A

Yes

86
Q

How long after account approval must a customer return the signed options agreement?

A

15 days

87
Q

FINRA Rule 2330 deals with what kind of annuities

A

deferred variable annuities

88
Q

Investors who are subject to the alternative minimum tax (AMT) will lose the tax benefits normally associated with

A

tax preference items.

89
Q

Are stocks listed on NYSE marginable?

A

Yes

90
Q

Are recent IPOs marginable?

A

No

you can’t buy recent IPOs on margin

91
Q

Are OTC stocks marginable?

A

No

No OTC or bulletin board stocks are marginable

92
Q

If a bond is trading at par, are the following all equal:

Coupon
Current yield
Yield to maturity
Yield to call

A

Yes

If trading at par they are all the same

93
Q

From left to right, what are the bond yields on the seesaw thing?

A

Nominal (or coupon)
CY
YTM
YTC

94
Q

If a customer is buying a bond and the BD quotes either he YTM or YTC, how does he decide which one to quote?

(Does he quote the higher/lower of the two)

A

Whichever is the lower of the two

Always have to quote “yield to worst”

95
Q

Regulation FD (fair disclosure) applies to who?

A

Issuers

when they disclose information that people may trade off of

96
Q

What has greater interest rate risk:

Long term bonds
or
Short term bonds

A

Long term bonds have greater interest rate risk

97
Q

Will a bond with a 1 year maturity trade close to par?

A

Yes, a bond with a only a 1 year maturity will trade very close to par

98
Q

Give an example of a debit call spread

A

Long Aug 50 call @ 5.5
Short Aug 55 call @ 3.5

(Debit spread because the option purchased costs more than the one sold)

99
Q

In a debit call spread, does the long option or short option cost more?

A

The long option costs more

Example:
Long Aug 50 call @ 5.5
Short Aug 55 call @ 3.5

100
Q

Define: ACATS

A

Automated customer account transfer service

When transferring securities from one account to another one at a different BD or bank

101
Q

When transferring accounts to a new BD using ACATS, how long does the transfer have to be competed
(assuming everything is in order)

A

If all is in order, the transfer must be completed within 3 business days

102
Q

When moving accounts to a new BD, who is responsible for sending the signed transfer initiation form (TIF) to ACATS: The sending firm or the receiving firm?

A

The receiving firm is responsible for sending the signed TIF to ACATS

(the firm the account will be moved to)

103
Q

An ____________ indenture allows additional bonds to be issued and backed by the same collateral.

A

An open-end indenture allows additional bonds to be issued and backed by the same collateral

104
Q

Basic equation for combined equity

A

LMV + CR - DR - SMV =EQ

105
Q

T/F: Income on qualified plans grows tax deferred

A

True

Tax deferred

106
Q

T/F: RMDs for non qualified annuities start at 59.5

A

False

>no RMDs for non qualified annuities

Series 7 (64 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions