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Series 7 > Analysis - 9% > Flashcards

Analysis - 9% Flashcards

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Series 7 Top-off Exam flashcards
0
Q

How many consecutive quarters of deflation for:

  1. Recesssion
  2. Depression
A
  1. 2

2. 4

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1
Q

What four Major issues is Fundamental Analysis concerned with?

A
  1. Monetarist policies as implemented by the FRB through is open market committed
  2. Fiscal vs Monetary policy
  3. Economic Indicators, leading, lagging, and coincident
  4. Specific company balance sheet and income statement information
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2
Q

What is the trough?

A

The point at which the economy bottoms and and begins to expand

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3
Q

Who does the fiscal policy involve?

A

the politicians and the bills that they pass

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4
Q

Which political branch can spend money it doesn’t have and authorize borrowing?

A

congress

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5
Q

What government decisions help the economy?

A

increased spending and lower taxes

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6
Q

What is the Keynesian Theory?

A

it is the government’s responsibility to stimulate the economy. the economy runs at and equilibrium level that is determined by income and spending, and aggregate demand.

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7
Q

What is supply side economics?

A

as long as government does not meddle with the economy, business will take care of itself. stable interest rates, money supply, and low inflation achieved through monetary policy will enable business to drive the economy

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8
Q

Who controls and what is Monetary Policy?

A
  • Controlled by the FRB or the Fed
  • Main bank is in NY
  • If the FRB believes the economy is growing too quickly it will tighten the money supply to slow the economy, causing interest rates to rise
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9
Q

The FRB Reserve requirement

A
  • overnight cash reserve that each Fed reserve member bank must maintain each night.
  • most powerful tool to tighten or loosen the economy
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10
Q

Discount rate

A
  • set by the FRB
  • rate that the FRB charges member banks for loans to meet their overnight loan requirement
  • FRB meets at least quarterly on the discount rate
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11
Q

Discount Window

A
  • when a member bank borrows from the main FR bank, which is considered the lender of last resort
  • borrowing from the main bank is a symbol that the member is experiencing financial trouble
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12
Q

Fed Funds Rate

A
  • intra-member bank rate
  • average of all interest rates charged by member banks for overnight loans
  • extremely volatile as it can literally change overnight
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13
Q

Federal Open Market Committee (Operations)

A
  • the most often used FRB tool
  • buys or sells treasuries in the secondary market through primary government securities dealers to help stimulate or slow the economy
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14
Q

M1

A

cash and demand deposits such as checking accounts

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15
Q

M2

A

M1 + savings accounts and some money market funds

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16
Q

M3

A

M2 + institutional investors and money markets

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17
Q

Interbank system

A
  • international, decentralized unregulated market
  • high risk market
  • foreign currencies are traded in large blocks of $1-$5 million
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18
Q

What can an inverted yield curve lead to and when is one formed?

A
  • leads to disintermediation, which is a large scale investor movement into long term debt instruments
  • formed with short-term rates rising above bond yields
  • this is tightening the money
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19
Q

What does a normal yield curve mean for money policy?

A

sign of loosening

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20
Q

Repurchase Aggreements

A

-when a bank dealer sells collateralized securities with a promise to buy them back

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21
Q

Commercial Paper

A

unsecured corporate notes with securities ranging from 30 to 270 days

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22
Q

Banker’s acceptances

A

import/export paper

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23
Q

CDs

A

jumbos requiring a min investment of $100,000

24
Q

Prime Rates

A

charged to the best customers

25
Q

call loan rates

A

charged to B/D for customer margin purchases

26
Q

loan rate

A

the highest rate

27
Q

order from lowest to highest loan rates

A
  1. discount rate
  2. fed funds rate
  3. money market rates
  4. repurchase agreements
  5. commercial paper
  6. banker’s acceptances
  7. CDs
  8. prime rates
  9. call loan rates
  10. loan rate
28
Q

Leading indicators

A

estimate future economic activity in a business cycle, determined by:
1. US Commerce Department
2. Conference Board
are conceptually negative as they lead the way to recession

29
Q

Leading Indicators (types)

A
  1. Consumer Confidence (as we are a consumer driven economy)
  2. Durable Goods
  3. Machine Tool orders
  4. Building permits
  5. housing starts
  6. S&P 500
  7. Claims for unemployments and length of manufacturing workweek
  8. index of consumer expectations
  9. the yield curve (spread between long and short interest rates)
30
Q

Coincident indicators

A
  • current indices(that show the current phase of the cycle), and the more current index, the more coincident
  • personal income
  • index of industrial production
  • GDP
31
Q

Lagging Indicators

A
  • employment
  • corporate profits
  • business inventories
  • they measure historical data
32
Q

NYSE Market Indicators

A
  • Dow Jones Average - 65 stocks (30 industrial, 20 transports, and 15 utilities)
  • Dow Jones Industrial Average - averages the movement of 30 widely held stocks
  • S&P 500 - 500 largest cap stocks in the US
  • NYSE Composite Index - broadest most accurate, it includes all common issues on the exchange (~1700)
33
Q

NASDAQ Market Indicators

A
  • FINRA publishes
  • NASDAQ 100
  • NASDAQ Composite -covers over 6500 stocks
34
Q

Wilshire Index

A

-consists of the market value of more than 7,000 NYSE, NYSE AMEX, and OTC issues headquartered in the US

35
Q

Cyclical Industries

A
  • Moves with the state of the economy
  • durable goods
  • large appliances, autos, heavy equipment and airplanes
36
Q

Defensive industries

A
  • steady predictable performance
  • consumable goods
  • food, alchohol, drugs, cosmetics, or clothing
37
Q

Counter Cylcical industries

A

-pawn shop and asset repossession industries

38
Q

Growth industries

A
  • new rapidly developing market sectors
  • technological advances
  • internet and biothech
39
Q

Net working capital

A

current assets - current liabilities

40
Q

Current Ratio

A

Current Assets/current liabilities

41
Q

Quick ratio (acid test)

A

current assets - (inventory/current liabilities)

42
Q

Common Stock Ratio

A

Par value of common + Retained Earnings + Paid In Capital/Total Long-term Capitalization (Stockholder’s Equity and Bonds)

43
Q

Bond Ratio

A

Par Value of Bonds/Total Long-term Capitilization

44
Q

Earnings per Common Share

A

Net Income - Preferred Dividend/Common Shares Outstanding

45
Q

Fully Dilluted Earnings per share

A

Net Income + Convertible Bond Interest/outstanding common shares + common shares resulting from conversion

46
Q

Technical Analysis

A

used by market makers and traders in the determination of price and time

47
Q

difference between Fundamentalists and Technicians

A
  • Fundamentalist (economists) used primarily for stock seletion, as they know the corporate financial statements and can select strong, growth companies - concerns are alpha, financial, and bankruptcy risks.
  • Technicians know market movements, support lines for purchasing stock, and resistance lines for selling stock - among chief concerns are beta risk, systematic risk, and market risk
48
Q

Head and shoulders formation

A

reversal of an upward trend

-inverse is the reversal of a downward trend

49
Q

Technical analysis market indicators

A
  1. 200 day moving average
  2. Advance/decline line charting
  3. Put/call ration
  4. Short interest theory - if rising, bullish as buyers will cover the shorts
50
Q

Alpha

A
  • the difference between the beta and the actual return obtained from an investment
  • neg alpha indicates underperformance
51
Q

Beta

A

-measures the reaction of a particular security in relation to the movements of the market as a whole

52
Q

CAPM, capital asset pricing model

A
  • determines value of a security

- equals the risk free rate of return and the time value of money

53
Q

What is the Inherited Securities cost basis?

A

the fair market value of the securities on the day of the deceased’s death

54
Q

Specific Identification for cost basis

A
  • must have supporting documentation

- may choose LIFO

55
Q

Mutual fund cost basis choices

A
  • weighted average

- Fifo/lifo

56
Q

What cost basis does the IRS default to?

A

FIFO

57
Q

Wash Sales

A

-may not sell and purchase a stock within a 61 day window for a loss, 30 days prior to and 30 days after the sale

58
Q

Corporate Dividend Exclusion

A

when a us corporation owns common or preferred stock of another domestic corporation and receives a dividend, it may exclude 70% of the dividend from its taxation

Series 7 (12 decks)

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