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Series 7 > 5th Set > Flashcards

5th Set Flashcards

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Series 7 Top-off Exam flashcards
1
Q

3 different forms dividends can be paid in

A

Cash, stock, or property

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2
Q

T/F: Bonds issued by US territories (i.e Virgin Islands) are triple tax exempt

A

True

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3
Q

T/F: For an investor, one of the major advantages of munis is that they are typically exempt from federal income tax.

A

True

No federal INCOME tax

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4
Q

Are C corps double taxed?

A

Yes

C corps are double taxed

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5
Q

If dividends from ADRs are paid in USD, who the investors still have currency risk

A

Even though paid in USD, dividends are still declared in foreign currency

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6
Q

Can REITs trade OTC?

A

Yes, and on normal exchanges too

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7
Q

75% of assets in a REIT must be invested in either income producing real estate or _____

A

Mortgages

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8
Q

In order for a REIT to avoid taxation as a trust, it must distribute __% of it’s net operating income

A

90%

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9
Q

T/F: Employers can contribute to a SEP IRA

A

True

Employers, not employees, make contributions to SEP IRAs, and the decision about whether and how much to contribute each year can vary.

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10
Q

T/F: The statutory prospectus is the final prospectus

A

True

Final prospectus

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11
Q

Give an example of a closed end fund

A

A muni bond fund

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12
Q

T/F: Ginnie Mae, Freddie Mac, and Fannie Mae all issue mortgage backed securities

A

True

They issue MBS

(Sallie Mae does not, it’s for student loans)

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13
Q

T/F: Sallie Mae issues mortgage backed securities

A

False

Sallie Mae is for student loans, etc.

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14
Q

What does Beta measure

A

Volatility of the security compared to market as a whole

Market has beta of 1.0

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15
Q

Is Sallie Mae backed by taxing power of the US government?

A

No

Sallie Mae is student loans

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16
Q

T/F: Freddie Mac is publicly traded and issues pass through securities

A

True

Freddie Mac buys mortgages

17
Q

Customer statements must be sent at least once every ____

A

3 months, quarterly

If account has penny stocks then monthly

18
Q

T/F: all reinvestments of mutual fund dividends (and capital gains distributions) are at the NAV with no sales charge.

A

True

Don’t pay sales charge when reinvesting

19
Q

If an uncle opens a Coverdell ESA for his niece and she takes a distribution for $10k even thigh she only has $9k of qualified education expenses, who pays the taxes on the excess $1k?

A

The niece

Any excess distribution representing earnings that is not used to meet qualified education expenses is taxable to the beneficiary who took the distribution.

20
Q

T/F: Partnerships, limited or general, and S corporations do not pay income tax. Any income earned by the business flows through to the owners.

A

True

No income tax for LP, GP, or s corp

21
Q

Taxes on payments received from a 403b (tax sheltered annuity) plan

A

100% taxable
Both earnings and principal

When tax-sheltered annuity funds are withdrawn, they are fully taxed at ordinary income rates. Funds were contributed pretax and earnings accumulate tax deferred.

22
Q

For a closed end investment company, is there a prospectus required after the IPO?

A

No

Unlike open end investment companies which require a prospectus

23
Q

What kind of shares can an open end investment company issue

A

Only common shares

Closed end can issue common, preferred and debt instruments

24
Q

What kind of securities can a closed end investment company issue?

A

Common shares, preferred shares, and debt instruments

Open-end companies can only issue common shares

25
Q

Are shares of a closed end investment company redeemable?

A

No

Shares in open end investment company are redeemable tho

26
Q

Are shares of an open end investment company redeemable?

A

Yes

The company must redeem shares

27
Q

When funds from a tax sheltered annuity plan (493b plan) are withdrawn how are they taxed?

A

Tax sheltered annuity plans (493b) are taxed at 100% ordinary income

Funds contributed pre tax
Earnings grew tax deferred
So no tax $ was ever due -> %100 ordinary income

28
Q

Min age to establish an IRA

A

No min age to open an IRA

However, to be eligible to make an IRA contribution, you must have earned income such as wages or tips. As with any IRA, that earned income must equal or exceed the amount of your IRA contribution.

29
Q

Do open end investment companies (like mutual funds) trade in the secondary market?

A

No

No secondary market trading

30
Q

Do closed end investment companies trade in the secondary market?

A

Yes

After ipo shares trade in secondary market (exchanges or OTC)

31
Q

Maximum sales charge for open end investment companies

A

8.5% max sales charge

32
Q

What business type (s corp, c corp, LP, etc.) would have the easiest time opening an account at a member firm

A

Sole proprietorship

Since sole proprietorships are opened as individual accounts

33
Q

Who handles the registration of limited partner units

A

The syndicator

not the general partner

34
Q

If soliciting new customers to buy penny stocks, do you need to prepare a suitability statement?

A

Yes

member must prepare a suitability statement showing why the proposed penny stock trade is suitable for that customer

(Not required if soliciting established customers)

35
Q

When soliciting penny stocks, you don’t need to prepare a suitability statement if soliciting “established customers”. What is the definition of this term?

A

An established customer is one who has effected a securities transaction, made a deposit of funds or securities in an account at least 1 year before the proposed penny trade, or made 3 purchases of penny stocks on 3 separate days involving 3 different issuers.

36
Q

Max amount of capital losses that can be deducted form income in a single ta year

A

$3k

Can carry over any remaining losses to next years

37
Q

How can you remember what options companies use to save themselves against currency fluctuations?

A

Remember the acronym EPIC: Exporters buy Puts and Importers buy Calls.

Series 7 (64 decks)

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