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Series 6 > Chapter 4 > Flashcards

Chapter 4 Flashcards

1
Q

What is the sale of new securities to buy an issue called?

A

Primary offering or primary distribution

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2
Q

The first time a corporation sells it’s tough to the public the primary offering is known as what?

A

Initial public offering or IPO

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3
Q

A name for a broker dealer that helps issuer sell security to the public.

A

Underwriter or investment banker

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4
Q

This document includes the underwriter face compensation public offering price the underwriting spread per-share net proceeds to be received by the issue here and a market out clause specifying any conditions in which the underwriter may terminate the contract

A

Underwriting agreement

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5
Q

Investigate the issue is industry to gain an Understanding of the business and meet with management to obtain and verify critical information needed to carry out the underwriters duties. The underwriter will also exam in the issue is current and future financial health legal issues management and operations is called what

A

Due diligence

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6
Q

The document that specifies the responsibilities of all of the selling group members

A

Selling group agreement

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7
Q

Payment to the selling group based on actual shares sold are called what?

A

Selling concession

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8
Q

Form submitted it to register securities

A

Form S-1 ( registration statement)

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9
Q

The end of the pre-registration. Which is also the date the registration statement is filed with the SEC

A

Filing date

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10
Q

During the cooling off period when reviewing the registration Statement the SEC looks to see whether the document seems clear and complete. FSEC believes changes are necessary what will it send to the issue work?

A

A deficiency letter describing objections

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11
Q

If a deficiency letter is it to an issue or what will the issue were have to do?

A

The issue I will need to file amendment to its registration statement which will restart the cooling off.

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12
Q

When is the due diligence meeting held

A

Just prior to the end of the cooling off period.

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13
Q

What securities are exempt from registration

A

US government and agency issues, municipal issues, money market issues, bank issues, common carrier issues, insurance company issues, and nonprofit or religious organization issues

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14
Q

Another reference for restricted stock

A

Letter stock

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15
Q

Private placements are sold under this regulation

A

Regulation d

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16
Q

Couples are partners that are not married but have essentially the same relationship as a married couple

A

Spousal equivalents

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17
Q

Issues that are exempt from registration must be provided for disclosure forms called

A

Offering circular or private placement memorandum (PPM)

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18
Q

Private placement under regulation D are considered

A

Exempt transactions

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19
Q

 Exempt transactions in an offering to investors and only one state

A

Rule 147 intrastate offerings

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20
Q

80% of the issuers gross revenues come from business activities in the state. 80% of the issue where his assets are located within the state. 80% of the net proceeds from the offering must be used within the state. A majority of the issue is employees must be based within the state.

A

Used to determine residency for rule 147

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21
Q

Securities purchase under rule 147 may not be sold outside of the state for how many months

A

6

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22
Q

Par value of preferred stock

A

$100

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23
Q

Stock purchased for income

A

Preferred stock

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24
Q

Stock purchased for growth or capital appreciation

A

Common stock

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25
Q

A legal agreement outlining the terms of the loan between the corporation and the bond holders

A

Trust indenture

26
Q

Three types of secured bonds

A

Mortgage bond, equipment trust certificate, collateral trust certificate

27
Q

Unsecured bond fact not only by the promise of the issue were to pay but also a parent company that will back the issuers promise. Like a cosigner to an automobile

A

Guaranty bond

28
Q

Bond issued by a corporation that is under we organization and coming out of bankruptcy. These bonds have no legal obligation to make interest payments. Carry a high default risk.

A

Income bond or adjustment bond

29
Q

Amount paid at maturity for a bond

A

Par value plus last interest payment due

30
Q

Par value for bond

A

$1000

31
Q

True or false. The interest income is taxable in the year received at the investors marginal tax rate on the federal level for US government securities

A

True

32
Q

Term for a T-bill

A

One year or less

33
Q

Term for t-note

A

2-10years

34
Q

Term for T- bond

A

10 or more years

35
Q

Government security that is Adjusted semiannually based on changes in the CPI. They have no inflation risk

A

TIPS

36
Q

Government security version of a zero coupon bond purchased at a discount to par and mature at par with a difference being the interest earned.

A

STRIPS

37
Q

Only agency security that is guaranteed by the full faith and credit and taxing power of the US government. They are often purchased by conservative income investors drawn to the products safety and monthly payment of principal and interest.

A

GNMA pass through certificate

38
Q

Suitable recommendation for investor looking for monthly income , offer higher interest than US government securities

A

GNMA pass through certificate

39
Q

A debt instrument issued by state and local governments are quasi-governmental agencies such as authorities or school districts. Not subject to federal taxation. Popular choice for high income investors.

A

Municipal bonds

40
Q

True or false. Municipal bonds are subject to default risk

A

True

41
Q

Document issued for new Municipal securities

A

And official statement also called offering document

42
Q

MSRB electronic website

A

EMMA

43
Q

When municipal issuers need to raise capital through a competitive underwriting they will publish a…

A

Official notice of sale

44
Q

To be federally exempt municipal bond issues must contain what

A

A legal opinion signed by the bond counsel

45
Q

Tax equivalent yield formula

A

Municipal yield / (100% - tax bracket)

46
Q

Net yield formula a.k.a. tax free equivalent

A

Taxable yield x ( 100% - tax bracket )

47
Q

Bonds that are taxable by federal and state

A

Corporate bond and government agency

48
Q

Bond that is taxable by federal and exempt from state tax

A

Us government bond

49
Q

Bond that is exempt from federal tax and taxable out of state tax, exempt is state of residence

A

Municipal debt

50
Q

Short term that instruments maturing in one year or less. Highly liquid and offer Safety of principal due to the short term maturity as well as being issued by Hailee credit worthy issuers. Can be sold only buy series 7 license registered representative

A

Money market security

51
Q

Short term unsecured debt instrument issued by a corporation as a promissory note to help finance accounts receivable and seasonal inventory overages. Issued at discount and must mature less than 270 days. Must have minimum face amount of 50,000 and be in the top three highest ratings by Moody’s or S & P

A

Commercial paper

52
Q

Debt securities used to finance foreign trade. When money is due from foreign company the US corporation may sell this debt to the bank as a letter of credit at a discounted price.

A

Bankers acceptances (BA)

53
Q

Bank issues that are usually purchased by large institutional investors. Minimum denomination is 100,000 guaranteed by the issuing bank maturing in one year or less. May be traded in the secondary market carry low risk due to short term maturity.

A

Negotiable CD ( Jumbo CD )

54
Q

Negotiable CDs are money market securities true or false

A

True

55
Q

True or false brokered CDs are money market securities

A

False

56
Q

Option that gives the holder the right to buy 100 shares of stock at the strike price up until the expiration date of the option contract

A

Call option

57
Q

Option contract that gives the option hold her the right to sell 100 shares of stock at the strike price

A

Put option

58
Q

Two hedging strategies

A

Long stock with a long put

Short stock with a long call

59
Q

Strategy used to provide income when the market is flat

A

Income strategies. Selling options

60
Q

Income strategies generate income for the investor by selling an option what?

A

Short.

Series 6 (10 decks)

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