66 Grab Bag

Question 1

What are the 4 main types of permanent records for an enterprise?

Answer 1

1. Articles of incorporation
2. BOD minutes
3. Stock certificate books
4. Partnership articles and any amendments

Question 2

What is sales literature?

Answer 2

Directed to a specific audience:

• Market and research reports
• Form letters not broadly distributed
• Password protected websites

Question 3

What defines an “accredited investor”?

Answer 3

Under Reg. D, an accredited person in a private placement is a person who:

• Earns at least $200,000
• has a Net worth of $1,000,000 exc. residence
• is an institution
• is an officer/director of issuer

Question 4

What are some general rules on gift taxes?

Answer 4

• First $15,000 of a gift to ANY person is excluded
• Cap on the tax rate is 40%
• Tax paid by donor, not recipient
• There is an unlimited marital exclusion for gifts

Question 5

An investment adviser that solely follows and recommends NYSE listed securities is exempt from what registrations?

Answer 5

Trick question - There is no exemption from registration for an investment adviser that follows only listed securities, at either the State or Federal level.

The adviser must be registered in the State if it manages assets of less than $100,000,000; and if the adviser manages assets of $100,000,000 or more, it must register with the SEC

Question 6

A valuation model used to predict portfolio performance is:

Answer 6

Expected return

This assigns a probability percentage to each possible rate of return for that asset class; multiplies the probability by the possible rate of return; and then “sums these up” to get the “expected” rate of return

Question 7

What is a 13F Report?

Answer 7

a report filed with the SEC by investment managers who exercise discretion over the accounts of $100,000,000 or more in securities

Question 8

When must a 13F report be filed?

Answer 8

Within 45 days of the quarter ending where the $100,000,000 dollar limit was reached

Question 9

What is a 13D report?

Answer 9

A report filed with the SEC by anyone who accumulates a 5% or greater holding in a publicly traded company and intends to take control

Note that 13G is similar but in the case of the investor remaining passive

Question 10

How are inflation and interest rates correlated?

Answer 10

Positively. If inflation goes up, interest rate goes up.

If deflation occurs, interest rates go down

Question 11

What act exempts from registration an adviser who gives advice to investment companies?

Answer 11

The NASAA state laws.

Under the SEC (IA act of 1940) these advisers are NOT exempt and still must register

Question 12

A customer buys a 3-year maturity, 6% coupon bond at par. If market interest rates rise to 8%, then the bond’s price will fall by:

Answer 12

5%

Year 1: $60 / 1.08 = $55.55
Year 2: $60 / (1.08)2 = $51.44
Year 3: $1,060 / (1.08)3 = $841.46

Total PV = $55.55 + $51.44 + $841.46 = $948.45

The bond will fall in price by $51.55 from $1,000 par, for a fall of 5.155%.

Question 13

A money manager that employs momentum investing makes investment decisions based on the:

Answer 13

Earnings TRENDS of the company

Question 14

What is the primary difference in strong and semi-strong market form theories?

Answer 14

Public info. Strong believes that insider info doesn’t matter, while semi-strong does