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65 Flashcards

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Series 65 flashcards
1
Q

Common Stock

A

Equity (ownership) Security

Security Growth / Cap appreciation

Voting rights not on officers; CEO CFO etc or diviends

Can vote on recap, merger, board of directors,

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2
Q

How do you ensure get a dividend on a common stock purchase

A

You have to be an owner of the stock by the end of the day on the record date

Trade day plus 2 days to settle

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3
Q

No rights to get a dividend on common stock is called and who determines the date?

A

Ex-dividend date Finra does that

The company does not record ex-dividend dates

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4
Q

Corporate Bond

A

Maximum income for investors - risk determined by credit rating
AAA - OK Strong rating investment grade

Double BB no way junk bond credit risk

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5
Q

Purchase a bond at a discount - how does that affect the income/interest?

A

No effect on interest - It’s a fixed INCOME securities

Does affect my ROI or yield higher return

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6
Q

Bond at a discount how does affect the yield and how to calculate? Annual income is $50 and the market price is $900

A

Increases the yield
$50/$900

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7
Q

How to calculate YTM bought it 980 - income is $40

A

20/10 $2 per year plus or if called earlier 5 years 20/5 $4

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8
Q

Who decides the Credit Risk on Bonds

A

Moodys. Standard and Poor and Finch
A speculative bond junk bond is bb
3 letters has to be good bond

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9
Q

Fundamental analysis of stocks

A

based on company financials
Assets Liabilites Balance sheets
P/E income statements

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10
Q

Tech analysis

A

charts - resistance and support levels
trends

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11
Q

Discounted cash flow

A

Coupon, principal, and maturity of dates

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12
Q

What is an analysis of equity securities

A

Dividend Discount Model

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13
Q

Top down Method Analysis

A

Looking at Economy, Industry , Company

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14
Q

Bottom Up Method Analysis

A

Company Industry Economy

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15
Q

Government Bonds Types and Investment Strategy

A

Cap preservation,
Bills 1,3, 6, 12 months
Notes 2-10 years
Bonds 10 plus yrs

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16
Q

Government Bond Risks

A

Interest and Reinvestment risk

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17
Q

TIPS - Treasury Inflation

A

Adjusted by CPI- semi-annual
example 1000 principal coupon 4% Inflation 3%
1030x 40 = income

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18
Q

How is a TIPS adjusted with inflation

A

CPI increase by 5% - so $1050 on the cost of the bond principal

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19
Q

Yankee Bonds/ Euro dollar bond

A

Foreign gov bonds- Foreign issued

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20
Q

Brady Bond

A

Foreign debt- US security

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21
Q

Municipality Bonds Good for what investor

A

Federal tax-exempt on the income /interest
No state in the residing state is issued
Suitable for the highest tax brackets
tax-free on the Interest only and not the capital gains

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22
Q

Corp Bond tax equivalent yield

A

Muni Yield /tax bracket of investor = equivalent tax-free yield

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23
Q

Cash and Cash Equivalent

A

Money Market, CD,

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24
Q

Money Market Open end

A

Highly, Liquid low risk, not FDIC, Safe income
Short-term parking money for 1 year or less
Can Not Sell Short

Money Market shares sold are redeemed by the fund and they issue new shares

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25
Q

NAV Net Asset value per share Calculation

A

total worth of fund minus expenses = net value
Net value/total number share is the price of the share bought at NAV plus sales charge max allows 8.5% for sales charge

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26
Q

Closed-end Fund Money Market

A

Share issued once and traded on the secondary market if the price fluctuates it can be an closed-end fund traded on the market in comparison to the NAV
Active Management

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27
Q

ETF

A

traded secondary market sold at NAV and sales charge
Mirrors an Index
Lowest expenses
Passive management

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28
Q

REIT

A

Pool of RE holdings secuirty 1934 act
Income INVESTORS

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29
Q

Options

A

Calls up Bullish rights to buy
Puts down market rights to sell

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30
Q

Options Hedge strategy

A

Its to protect the stock OR for Income never both

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31
Q

Futures Contracts

A

Options on commodities agriculture
right to buy or sell in a specified time and quantity
Buy to consume
sell lock in price to sell
Example farmer sell futures to lock in wheat price

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32
Q

Forwards

A

Unreg. unregistered
purchase Institutional /only private sellers
hard to close the position- illiquid

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33
Q

Limited Partnership

A

Passive Investment
General Partner Manages
Not liquid
Number one reason for a viable/profitable business to investment

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34
Q

Hedge Funds

A

loosely reg investment co
NOT mutual fund
Uses Options to speculate or derverivtatives or buy on margin

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35
Q

Structured Investment ELN Equity linked Note

A

Debt instrument linked to an equity index

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36
Q

debt security that has 270 days or less to mature?

A

Commercial Paper exempt security to register
face value above 50K

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37
Q

Which form is submitted annually for corporate books and records for shareholders?

A

10-k

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38
Q

Red herring Offering

A

pre prospectus during the 20 day cooling period before reg with SEC for a security

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39
Q

tombstone ad

A

Notice of sale - NOT AN AD

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40
Q

EFAE Index suitability

A

broad International investment fund

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41
Q

Pre-org certificates

A

no more than 10 subscribers ONLY no accredited investors

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42
Q

“Qualified Individual” for vulnerable adults

A

is any supervisor agent/IAR compliance officer or legal capacity - managers directors partners that are registered and are to handle these situations

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43
Q

restricted shares are exempt through which form?

A

Form 44

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44
Q

How is the GDP measured

A

All goods and services in constant dollars- no inflation accounted

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45
Q

Keynesian Economics Believe

A

governments should closely monitor: interest rates, tax rates, and social programs

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46
Q

Futures

A

exchange-traded and regulated, can be closed easily more liquid

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47
Q

Fixed annuity investment risk

A

Inflation

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48
Q

Variable annuity

A

sub-account/separate accounts in stocks and bonds not guarantee non-qualified annuity after-tax money- taxed on LIFO on ordinary income no inflation risk
min guarantee death benefit no guarantee on the investments

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49
Q

Variable Annuity linked to an Index
Equity based annuity

A

nonqualified better tax situation

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50
Q

STRIPS

A

Long-term bond zero coupon -suitable for baby savings for college- reinvestment risk because no income is being paid and you have to wait for all your money

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51
Q

Variable Universal Life

A

flexible prem. No guarantee on death benefit or investment

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52
Q

Simple trust is taxed when?

A

Distributes annually and taxed annually

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53
Q

Complex trusts are taxed when ?

A

only if they distribute income

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54
Q

who settles /sets up a trust

A

settler , grantor

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55
Q

Beneficiaries of a trust that pass away and their share goes to?

A

Per stripes /remainderman

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56
Q

Beneficiaries of a trust that pass away got to?

A

Per stripes /remainderman

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57
Q

Trust “Prudent Man Rule”

A

The trustee must manage the account on the stated investment objective in the trust agreement

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58
Q

What form does a trust file for taxes ?

A

1041

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59
Q

Corp balance sheet Asset Formula

A

Assets ( all RE) investments, cash, Jewelry-

Debt- Consumer debt, mortgages, car loans

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60
Q

Statement of cash flow on Corp balance sheet

A

Cash- investment income, rental income -
Debt tax utilities, mortgage payments

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61
Q

What is the most important investment OBJ. for recommendation?

A

Stated Investment OBJ of the client

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62
Q

Client recommendations, safety

A

US debt securities

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63
Q

Client recommendations, income

A

Corp. Bond REIT, Preferred Stocks

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64
Q

Client recommendations, growth

A

Common stocks, long term horizen

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65
Q

What is the time horizon of people goin to retire?

A

Life expectancy left when going to retire

66
Q

Futures Contracts

A

Options on commodities agriculture
right to buy or sell in a specified time and quantity
Buy to consume
sell lock-in price to sell
For example, farmer sell futures to lock in wheat price

67
Q

Extention Risk is for what security?

A

Mortgage-backed securities

68
Q

Hedge Fund Risks

A

Market, legislative and liquity risk

69
Q

What is Regulation D for?

A

An exempt transaction for Restricted shares

70
Q

Strategic Asset Allocation

A

Long term planning but must rebalanced when markets change

71
Q

Tactical Asset Allocation

A

timing the market

72
Q

active management of portfolio

A

Are choosing what is best for the portfolio currently

73
Q

Passive management

A

Are typically index funds and ETF’s/ Buy hold

74
Q

Primary security that avoids interest rate risk while producing income

A

Short term bonds

75
Q

Federal reserve tools for monetary policies

A

REG T, Open market and reserve requirements, discount rate (money loaned to the banks)
Open markets is the primary tool used

76
Q

Rights

A

Intrinsic value and have immediate benefits

77
Q

Warrants

A

not issued with intrinsic value - give investors the right (but not obligation) to purchase company stock at a specific price within a specified time period.

78
Q

Default Risk

A

Only debt securities - not being able to pay interest

79
Q

Who decides the Credit Risk of Bonds

A

Moodys. Standard and Poor and Finch
A speculative bond junk bond is bb
3 letters has to be good bond

80
Q

Common Stock Risks

A

Regulatory risk, liquidity risk and purchasing power risk

81
Q

ADR Risks

A

ownership in a foreign company - currency risk because the income has to be converted from the other currency and a strong dollar would reduce the income exchange

82
Q

Capm use what risk

A

Utilizes beta

83
Q

Acid test ratio (current ratio)

A

Current Assets- Inventory/ liabilities =Current ratio
Current assets and inventory are considered within a year

84
Q

What is the main risk of the OTC market?

A

Liquidity risk because it can hard to sell in this market with unregistered securities

85
Q

Coverdells

A

Age req. to 18 used by 30
Income phase outs
After tax money tax free- funds not used for school 10% penalty
Any education level

86
Q

529 plan

A

10k for high school
tax-free money coming out
No income contribution phase-out
Funds not used for education 10% penalty

87
Q

Average cost single category for tax

A

ONLY avail. to mutual funds - once elected can not be changed until entire account is liquidated

88
Q

Political Risks

A

Foreign risks of government

89
Q

Who is considered an insider at a corporation?

A

directors, officers, and 10% shareholder

90
Q

Discounted cash techniques are used for?

A

will purchase the highest NPV which indicated its trading at a discount
Negative NPV is trading at a premium and more expensive than its worth

91
Q

POA

A

Given the ability for trades and withdrawals, IAR can get 10 days of verbal approval before a written POA
BD must get a written POA no verbal accepted

92
Q

Limited POA

A

trades no withdrawls

93
Q

POA from security accounts access

A

Given the ability for trades and withdrawals, IAR can get 10 days of verbal approval before a written POA
BD must get a written POA with no verbally accepted

94
Q

Strategic

A
95
Q

Efficient market theory

A

weak - only price and volume
semi strong- all publicly known financials price volume will reflect in the price
Strong- all inside and public info is known and will reflect in the price - no analysis will help you decide because all information is shown the price

96
Q

Modern Portfolio Theory

A

Diversification through different asset classes negatively correlated

97
Q

Growth Stocks

A

High P/E, no dividends, earnings

98
Q

Value Stocks

A

Low P/E, high dividends, stable earnings

99
Q

Highest Diversification

A

Negative correlation greatest -10 example

100
Q

What RE can you put in an IRA ?

A

ONLY BUSINESS PROPERTIES- no personal

101
Q

What cannot be in IRA for investments

A

Life insurance, Muni bonds (tax-free in a tax deferred plan) Art and collectibles

US gold coins yes can be in an IRA!

102
Q

QDRO qualified divorce order

A

Whoever receives the asset has no 10% early withdrawal penalty

103
Q

How is alimony taxed ?

A

Included in AGI

104
Q

How is child support taxed ?

A

Non taxable

105
Q

Erisa Plan require?

A

Min 3 plan choices, conservative moderate and aggresive

106
Q

IPS Investment Policy Statement

A

Not required - provided to the plan participants- no investment choices are included by the advisor and does NOT include the Summary plan doc.

107
Q

Summary Plan document for Employee benefit programs

A

Provided by the plan sponsor and is required

108
Q

Totten Trust or POD

A

Assets will be transferred on death, example grandpa want to leave asset to the grandkid but still have access while he is alive, then it goes to grandkid

109
Q

529 plan

A
110
Q

Coverdell max contribution

A
111
Q

UGMA

A

One custodian and One Minor - No limit to gift a child- age of the majority (legal age) will be fully in the minor’s name- irrevocable

112
Q

Max gift

A

15k donor pays tax

113
Q

utma

A

Minor receives it at 25 could say age of majority

114
Q

Market Makers

A

Bringing buyers and seller together in an exchange in OTC must be with Finra

115
Q

Specialists

A

Bringing buyers and seller together in an exchange -ex. NYSE

116
Q

Stop Orders- Conditional

A

If/then
3 step program
1) does the client own “buy” it or want to “sell”
2) Do they believe it bullish or bearish
3)
SL BS above market value
Bs BS below market value

117
Q

Who oversees the extension of credit in the exchange

A

Federal Reserve Bank FRB- regulation

118
Q

Insider trading enforcement act 1986

A

everyone involved knowingly used insider information
fee: 1m / 3x profits Tippy and tipper rule applies to any information inside the actual corporation there is Chinese wall material information

119
Q

What form does a non-exempt issuer ( company) use to register with the USA?

A

U10

120
Q

Who is a fiduciary?

A

IA ———NOT a BD

121
Q

Who advice is incidental to their occupation when giving securities advice?

A

LATE - Lawyers, Attorneys, Teachers, Engineers

If they charge any fee for advice they must register

122
Q

What is the common method of security reg with the USA for security

A

Coordination- state and federal registration - done at the same time and send all the same paperwork

Effective when the SEC clears the security and doesn’t have to be both

123
Q

The security offered in one state interstate how does it get registered?

A

They register by qualification

124
Q

NSMIA

A

Fed covered Advisor
Fed covered Security

125
Q

Filing Notice for which securities?

A

Federally covered securities - notice filing is with the state ONLY for fees still req of fed reg securities

126
Q

Who is exempt from registering

A

US government, bank, nonprofit, Canadian, muni, foreign gov.

127
Q

What qualifies as Exempt transactions- unregistered

A

Unsolicited, between institutions, private placements (accredited investors)

128
Q

Legislative risk

A

about any investment that has tax advantages

129
Q

Regulatory risk

A

Government change the rules or laws on something Example FDA make an approval change for a drug

130
Q

Covered calls

A

Income play

131
Q

8k form

A

Is filed when a company has a material event

132
Q

Which investment is the most tax efficient?

A

Index fund

133
Q

Modern Portfolio Theory

A

Max return in risk - Market risk reduction

134
Q

Credit Risk

A

Default risk- government bonds are lowest default risk

135
Q

Liquidity Risk

A

hard to sell, private placement / forward contracts

136
Q

What is not a sale of security in the USA ?

A

Bona fide loan of securties

137
Q

3rd party solicitor has to give clients?

A

Disclosure of compensation, ADV part 2 Broshure , and broshure on soliciter signed by client

138
Q

How do you calculate the future cash flow of a bond?

A

Need # of payments, principal and what the nominal yield or interest will be

139
Q

Who is not a person according to the USA ?

A

Minor, deceased, legally incompetent

140
Q

Equity Index Annuity

A

No negative reset ever

141
Q

What are federally covered securities?

A

Mutual fund, register with the SEC

142
Q

What hedges Inflation risk?

A

Tangible assets, precious metals (copper is not a precious metal), TIPS

143
Q

What is the best way to depict time-weighted return?

A

The volatility of the holdings

144
Q

order in which creditors are paid

A

Bonds, unsecured bonds, preferred, common, unsecured and secured

145
Q

Largest payout for annuity

A

Straight lIfe only

146
Q

Current Ratio

A

Assets minus liabilities /current liabilities

147
Q

Time value of money

A

Taking a lump sum or getting paid over a period time
Money worth today versus money worth in the future

148
Q

Regulation T

A

Margin account 50% required

149
Q

Class A share of Mutual Fund

A

Front loaded, long term investor, 8.5% max LOI
Breakpoints - ILLegal to sale a breakpoint

150
Q

Class B Mutual Fund

A

Deferred Contingent sales charges

151
Q

Class C

A

Promotional fees

152
Q

Derivatives

A

Options and Futures

153
Q

true or false ETF purchased on Margin

A

True, can not purchase Mutual funds on Margin

154
Q

General Partnership Risk

A

Liquity must get permission form GP to get out

155
Q

How are the assets selected in a UIT, Unit investment trust

A

Professionally selected

156
Q

UIT is governed by which Act?

A

Securities Act of 1933- they are a primary offering
can not buy on margin

157
Q

Rebalancing

A

is investing constant dollar into to different asset classes

158
Q

Equivalent Tax free Yield

A

Divide the tax free yield by the investor tax bracket

159
Q

Calculate the taxable yield

A

Multiply the yield by the tax bracket of the investor

160
Q

Gift between Spouses

A

Unlimited amount

161
Q

What 3 types of investments does the Investment Act of 1940 regulate?

A

MGMT co. , Unit investment trusts and face amount certificates

series 65 (1 decks)

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