Final Push

Question 1

Draw the Gifted Securities Cost basis Diagram

Answer 1

draw it

Question 2

If Question gives you the Beta, Market Return, and 90 Tbill then asks you to calculate the Expected Return whats the process

Answer 2

1) Market Return - 90 Tbill
2) that return plugged into beta/ Alpha equation
3) add 90 Tbill back into the Beta / Alpha return

Question 3

Can BD have a list of securities approved for use?

Can Agents of BD use that list without doing their own suitability check because the BD has already done it?

Answer 3

Yes - its just a list of securities not actual investment advice

No - Agent must do their own suitability

Question 4

Gifting limit before a gift tax is occurs

Answer 4

17k/yr
34k/yr if married

this is a tax on the person receiving the gift not the one giving it

Question 5

If a married couple wants to give money to their son and his wife how much can they give before a gift tax occurs?

Answer 5

68k/yr

because both parties are married its 17k x4

Question 6

which index is price-weighted?
how are most others weighted?

which one’s focus is more likely on Mid-cap companies?

Answer 6

Dow Jones (30 companies)
most others are weighted by market cap not price

S&P 400

Question 7

Difference between:
-Investment Constraint
-Investment Goal
-Capital Need
-Financial Objective

Answer 7

-Investment Constraint- “I do not want to any oil companies”
-Investment Goal- “I want to fund my kid’s college” - has to be uncertain if you will attain it or not
-Capital Need- “I Need $_____ dollars, WHERE am I going to get it” - focused on how to fund it
-Financial Objective - “I want to be able to retire with 200k/yr in income” - more $ specific than an investment goal

Question 8

to determine if something had MArket risk or business risk ask yourself…

Answer 8

WHY did the companies stock go down?

if because of a market crash = market risk

if anything related to that individual company = business risk

Question 9

Define:
-Hypothecation Agreement
-Credit Agreement
-Loan Consent Agreement
-Interest Computation Agreement

and which of these is required for opening a Margin account?

Answer 9

-Hypothecation Agreement - Agree to let BD use your equity for “hypothetical” collateral for bank loan

-Credit Agreement - Agree to get a loan for $

-Loan Consent Agreement - Agree to let others borrow your stock for their Short Sells

-Interest Computation Agreement - Explains how interest on the Loan is being charged IS A PART OF THE CREDIT AGREEMENT

Required for Margin account:
-Hypothecation Agreement
-Credit Agreement

-Interest Computation Agreement (sort of the credit agreement is required and this is a part of that not its own agreement)

Question 10

when calculating Alpha on the exam should you use the 90 day T-Bill

Answer 10

if they provide it in the question then yes!!!

(subtract the tbill from the market and portfolio return then solve for Alpha)

Question 11

Do open or closed end funds have Intra-day price changes

Answer 11

Only Closed End

(open end funds NAV is calculated at the end of the day whereas Closed end price is determined byt he market)

Question 12

difference between
iBonds
and
i Shares

Answer 12

iBonds - bonds linked to inflation, pay a fixed coupon, 10 yr term (the corporate version of TIPS)

iShares - institutional open end funds, 250k minimum to enter

Question 13

Which CMO’s pay monthly interest?

Answer 13

GNMO’s only

(maybe Sally Mae but that changed awhile ago and only true if the test is outdated)

Question 14

Are ETN’s / ETF’s registered
Investment Companies

Answer 14

ETN - NO

ETF - Yes

Question 15

Are ETN’s / ETF’s considered Alternative Investments?

Answer 15

Yes to BOTH

Question 16

Taxes in a revocable trust are usually paid by who?

what about irrevocable trust

Answer 16

the Grantor

what about irrevocable trust - the trust itself (its way more complicated than that and probably not on the test)

Question 17

Does UGMA/UTMA’s custodian have to
be a guardian?
get permission from the guardian?

Answer 17

neither,

The account is opened in the name of the minor with the minor’s Social Security number and the name of the adult listed as custodian. Thats IT

Question 18

Are speculative options strategies allowed in a IRA?

Answer 18

No
but covered calls would be because they are not speculative

(basically uncovered calls are not allowed but covered calls are)

Question 19

if married person inherits Stock from their deceased spouse do they still get the step up in cost basis even though they were married?

Answer 19

YES

Question 20

Changes to IA Brochure means the brochure or a summary of the changes must be delivered to all current clients within what time frame?

Answer 20

within 120 days of the end of the adviser’s fiscal year.

Question 21

arithmetic mean

Answer 21

the simple average

Unless something else is specified, whenever the mean return is referenced, it is always the arithmetic mean

Question 22

which exempt issuer is only exempt if they are authorized to do business in the state.

Answer 22

Savings and Loan

and

Building and Loan

Question 23

remember Capital Gains and Long Term Capital Gains are 2 different things

Answer 23

remember Capital Gains and Long Term Capital Gains are 2 different things

Question 24

Risk Premium

Answer 24

the portion of total return that was acquired through risk

Total Return - Risk Free Return(the 90 day t bill)

Question 25

Registered Person Withdraws their registration

When does withdrawal become effective?

Admin can begin disciplinary actions for any violations on the person within what time frame

Effective date may be delayed IF

Answer 25

Effective - 30 days after filing the withdrawal

Admin - within 1 year from effective date of withdrawl (not when they filed but when it was effective)

Delayed IF - Admin initiates disciplinary action within the 30 day filing window

Question 26

Would An offer or sale to a Broker Dealer be considered
exempt from the registration and advertising filing requirements?
(under the USA - state law -)

Answer 26

Yes

Question 27

Do Federally Registered IA’s have to notify state Admin’s of their federal registration?

Answer 27

Yes

in each state where they have an office.

(they have to NOTIFY them NOT Register with them)

Question 28

ARe Agents of Broker Dealers allowed to file an application to register a security’s offering

Answer 28

No

only the BD acting on behalf of the issuer

Question 29

Are the earnings portion of Withdrawls from a NQ annuity taxed as Long term capital gains or taxable income?

Answer 29

taxable income. Annuities grow tax deffered which means its taxed as ordinary income when withdrawn (only the earnings not the contributions and its on a LIFO basis)

There is never a capital gain with a variable annuity

Question 30

is there a tax penalty for taxing NQ annuity distribution before 59 1/2?

Answer 30

YES

Question 31

How frequently are the following on a Variable Life Policy calculated:
Unit values
Policy cash values
Death benefit

Answer 31

Unit values - Daily
Policy cash values - Monthly
Death benefit - Annually

Question 32

which Index is for small Cap companies

Answer 32

Russell 2000

(its tracks 2000 small cap companies)

Question 33

what form of portfolio management
rotates between sectors according to the business cycle

Answer 33

sector rotation

(NOT Tactical Managment)

Question 34

if a client goes to school or does a resident MBA program in another state, does BD IA IAR agent need to register in that state to keep working with them?

Answer 34

NO

going to school or doing a residency program in another state does not make that individual change the state they are a resident of.

Question 35

Which Derivitives can be bought on Margin?

Answer 35

Warrants
and
LEAPS