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Series 7 > 2nd set > Flashcards

2nd set Flashcards

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Series 7 Top-off Exam flashcards
1
Q

Formula for EPS

A

Net income (after taxes, interest, & preferred dividends)

divided by

Shares of outstanding common stock

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2
Q

Do firms have to file their AML program with FINRA?

A

No

AML programs are neither filed with or approved by the SEC or FINRA

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3
Q

Catastrophe call provision

A

A call only occurs if an unpredictable event requires the issuer to call the bonds

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4
Q

Max contribution from a municipal finance professional to political campaign

A

$250

If more than $250, firm can’t engage in CERTAIN municipal business for 2 years

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5
Q

If a stock is halted, do the options for that stock get halted too?

A

Yes

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6
Q

Are section 529 plans legally considered municipal fund securities

A

Yes

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7
Q

What are section 529 plans primarily used for?

A

Saving for college

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8
Q

Best option to hedge a long stock position with

A

Long put

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9
Q

When a company reacquires shares of outstanding stock, how would you refer to these shares?

A

Treasury stock

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10
Q

Is a call protection feature most valuable during period of rising/declining interest rates

A

Declining interest rates

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11
Q

How is an account marked when the owner has died?

A

The account is marked deceased

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12
Q

In a municipal offering, the agreement among underwriters is found in what document?

A

It is found in the Syndicate Agreement

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13
Q

Visible supply measures the dollar amount of new issues scheduled for the next ____

A

1 month

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14
Q

Rule that addresses the sale of nonregistered securities to institutional investors

A

Rule144A

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15
Q

Regulation that has to do w/ corporate offerings not exceeding $50m in a 1 year period

A

Regulation A

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16
Q

Length of the holding period required before restricted securities can be sold

A

6 months

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17
Q

Length of time a Form 144 filing covers

A

90 days

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18
Q

T/F:

A Form 144 might be filed with the SEC when an afiliate of company is selling a large amount of that company’s shares.

A

True

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19
Q

Under what circumstances must a Form 144 be filed

A

When an affiliate of the issuer is selling more than 5,000 shares or $50k worth of shares in a three month period

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20
Q

Five things that are permitted during the cooling off period

A

These activities/marketing materials are permitted:

1) Red herring (aka preliminary prospectus)
2) Collection of IOIs
3) Tombstone ad
4) Road shows
5) Free Writing Prospectus

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21
Q

Regulation A is an exemption from ______

A

Regulation A is an exemption from registration for public offerings

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22
Q

Term for assets and liabilities that are easily accessible/payable within 1 year

A

“Current” Assets and Liabilities

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23
Q

Name 3 different “current assets”

A

1) Cash on hand
2) CDs w/ a maturity date within 1 yr
3) Accounts receivable with terms less than 1 yr

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24
Q

Name 2 “current liabilities”

A

1) Short-term loans of less than 1yr

2) Accounts payable within 1 yr

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25
Q

Balance Sheet formula

A

Assets - Liabilities = Net Worth

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26
Q

An Indenture is a contract between what two parties?

A

The bond issuer and the bond holders

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27
Q

T/F:

Not all bonds need to have an indenture

A

False

All bonds must have an indenture

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28
Q

Would the coupon rate be found on a bond indenture

A

Yes

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29
Q

T/F:

Price, maturity date, and coupon rate would NOT be found on a bond indenture

A

False

All these things would be found on a bond’s Indenture

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30
Q

T/F:

Much of the same info in an Indenture can also be found in the bonds Prospectus

A

True

31
Q

T/F:

Regarding bonds, the prospectus uses less technical language than the Indenture

A

True

32
Q

Regarding a bond issue, which considered the “final word”:
the Prospectus
or
the Indenture

A

The indenture would be considered the Final Word

33
Q

T/F:

The Indenture is another name for a bond’s contract terms

A

True

34
Q

Can a share of stock in a rights offering require more than one right to purchase?

A

Yes

This would mean you have to own multiple shares (to get multiple rights)?

35
Q

Formula for shareholders equity

A

Total assets - Total liabilities

36
Q

Does the final prospectus contain the final offering price & date?

A

Yes

37
Q

The final prospectus is called _____

A

The Statutory Prospectus

38
Q

What is the intent of the SEC’s no approval clause printed on the first page of a prospectus?

A

Showing the SEC doesn’t verify accuracy of the info, and doesn’t endorse/approve any security

39
Q

The SEC’s no approval clause is printed on what page of the prospectus

A

It’s printed on the first page of the prospectus

40
Q

Would an underwriter advise the issuer on the preferred capital mix of debt and equity issuance?

A

Yes

41
Q

Is the underwriter responsible for ensuring the issuer complies with securities laws?

A

Yes

42
Q

Is the underwriter responsible for distributing large blocks of stocks to institutions

A

Yes

43
Q

Two things the issuer (not the underwriter) is responsible for filing in an IPO

A

1) Filing the registration statement as required by the Securities Act of 1933
2) Filing state level registrations in accordance with “Blue Sky” laws

44
Q

Which act required registration and a prospectus for any security to be distributed in more than one state

A

Securities act of 1933

45
Q

Which Act created the regulatory body for securities in the primary and secondary market

A

Securities act of 1933

46
Q

Which Act defined criminal penalties in the event of securities fraud

A

Securities Act of 1933

47
Q

Chinese wall

A

Information barriers implemented by a firm

48
Q

Difference between selling syndicate and selling group

A

Members of the selling syndicate put up their own capital to purchase the shares of the new issuer.
Members of the selling group may assist in the distribution of shares by selling them to clients but they have none of their own capital at risk.

49
Q

Gross Spread

A

The difference between the public IPO price and the amount of that price the issuer will actually receive.

50
Q

Roles of an issuer’s underwriter during the cooling off period

A

The underwriters make a judgement on the company as a whole and verify the feasability of the claims made by the issuer. They also provide feedback to the issuer about potential pricing and overall investor demand for the issue.

51
Q

Are T bills good for income investors

A

No

They offer no income

52
Q

A bond backed by machinery or rolling stock is called a(n) __________

A

Equipment Trust Bond.

53
Q

Name 4 money market instruments

A
  1. T-Bills,
  2. Bankers’ Acceptances (BAs),
  3. Commercial Paper,
  4. Negotiable CDs
54
Q

When do corporate bond trades settle

A

T + 3

55
Q

Is interest on corporate bonds fully taxed?

A

Yes

56
Q

When do money market securities mature?

A

1 year or less

57
Q

A bond convertible at $50 is trading at $1,200. For parity, where should the stock be trading?

A

Conv. ratio = $1,000 ÷ $50 = 20 sh. The stock needs to trade at $60 to be at parity with the bond ($1,200 ÷ 20 = $60).

58
Q

In general, are the prices of long term bonds or short term bonds more volatile?

A

Long term

59
Q

Does the price of a bond with a low coupon rate or high coupon rate tend to be more volatile !

A

Low coupon rate

60
Q

List the 4 yield amounts in descending if a bond is selling at a premium.

A

In descending order:

1) Nominal yield
2) current yield
3) YTM
4) Yield to call

61
Q

A 403(b) plan is also called a _____

A

A tax sheltered annuity

62
Q

Are dividends from a muni bond fund exempt from federal income tax?

A

Yes

63
Q

Are dividends from a UIT exempt from federal income tax?

A

Yes

64
Q

Is there any tax advantage to reinvesting dividends from a common stock fund?

A

No

65
Q

When an investor reinvests dividends from a common stock fund, what happens to his cost basis?

A

It increases by the amount of the dividend

66
Q

If an investor calls a broker and says “buy 100 shares whenever you think is the best time” what kind of order is this

A

A time or price order

67
Q

How long is a time or price order good for?

A

Good for only the day entered

unless written instructions say otherwise

68
Q

Is a time or price order a discretionary order?

A

No

69
Q

[Mutual funds] If the sales charge comes off the amount invested, is it a front end load or back end load?

A

Font end load

70
Q

What class of mutual fund shares are best for investors who can afford a high initial investement and have a long time horizon

A

Class A mutual fund shares

71
Q

T/F: If a customer purchases an insured muni bond, you must provide evidence that the bonds are insured when delivering the certificates.

A

True

72
Q

T/F: Fannie Mae and Freddie Mac are both publicly traded GSEs that buy mortgage loans

A

True

73
Q

What is form 144 filing

A

Affiliate of issuer sells > 5k shares or $50,000 in three month period

Series 7 (64 decks)

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