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Series 7 > Practice Areas > Flashcards

Practice Areas Flashcards

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Series 7 Top-off Exam flashcards
1
Q

Outstanding Shares

A

Issued Shares - Treasury Shares

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2
Q

Treasury Shares

A

Issued Shares - outstanding shares

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3
Q

Dividends payable as

A

Cash, stock or property

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4
Q

Annual Dividend

A

Most recent quarterly dividend x 4 quarters

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5
Q

What is the dividend yield for XYZ trading @42 with a $2 annual dividend?

A

$2/$42 = 4.76% dividend yield

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6
Q

What is the dividend declaration date?

A

date divided is declared

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7
Q

Who determines the dividend declaration date?

A

The board of directors

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8
Q

When is the ex-dividend date?

A

1 day before the record date

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9
Q

Who determines the dividend ex date?

A

FINRA of SRO

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10
Q

What is the record date?

A

Date a trade must settle by for buyer to receive current dividend

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11
Q

Who determines the record date?

A

The board of directors

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12
Q

What is the dividend payable date?

A

Date the dividend is distributed

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13
Q

Who determines the payable date?

A

The board of directors

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14
Q

Cash dividend

A
  • Received by the share holders
  • Market price of stock declines by the amount of the dividend on the ex date
  • Taxable when revived
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15
Q

Stock Dividend Adjustment

A
  • Market price and cost basis of stock adjusts lower for dividend
  • Investor recives aditional shares
  • Aggregate value remains the same
  • Taxable when shares are sold
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16
Q

Stock split adjustment

A
  • Market price and cost basis lower for split
  • Investor recives additional shares
  • Aggreate value remains the same
  • Taxable when shares are sold
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17
Q

Reverse split adjustment

A
  • Market price and cost basis of stock adjusts upfor reverse split
  • Investor will have fewer shares
  • Aggregate value remains the same
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18
Q

Prefered stock

A
  • Fixed par value (assume $100)
  • Divdends are fixed stated rate (% of par)
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19
Q

Straight Preferred

A

Missed dividens are not payable

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20
Q

Adjustable Rate Preferred

A

Dividend tied to antother rate (eg. T-bill rate)

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21
Q

Participating Preferred

A

Issuer may pay more than stated dividend

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22
Q

Callable Preferred

A

Issuer may buy back shares afer specified date at specified price

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23
Q

Cummulative Preferred

A

Missed dividends must be paid before common

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24
Q

Rights

A
  • Availalbe to equisting share holders
  • Short term (30-45 days)
  • When issued exerisice price is below CMV (allows purchase at a discount)
  • Not marginable
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25
Q

Warrants

A
  • Offered with other seurites as sweateners sold as units (eg bond with warrent)
  • Long term (2-5 years or longer)
  • Price is above CMV (anticipated value with time)
  • Marginable
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26
Q

ADR’s

A
  • Faciliatae US citazens owning foreign shares
  • US security sold and traded in US markets (in us dollars)
  • Divdend is declared in foreign currency but paid in US currency
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27
Q

Where are REITS traded?

A

exhanges or otc

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28
Q

What percentage of assets must be invested in operating income producing real estate or mortgages to qualify as a REIT?

A

75%

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29
Q

What percentage of net operating income must be disbuted for REIT to avoid taxation as a trust?

A

90%

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30
Q

Cupon, Nomial or stated yeild on bond

A

Annual interest / par value

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31
Q

Yeild to maturity

A

Annualized return if held to maturity

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32
Q

Current yeild

A

Annual interest / current market value

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33
Q

Yeild to call

A

Return reflecting early redemption and accelatrion of discount dain or premium loss.

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34
Q

Order of yeilds for bond trading at a discount

A
  1. YTC
  2. YTM
  3. CY
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35
Q

Order of yeilds for bond trading at a premium

A
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36
Q

When will isuers calls bonds?

A

If they ancipate current interest rates falling.

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37
Q

What is the conversion Ratio for convertable bonds?

A

par / conversion price

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38
Q

What is the parity price of common stock for convertible bonds?

A

market price of bond / converstion ratio

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39
Q

Liquatation Priority

A
  1. Secured bonds
  2. debentures and general creditors
  3. subrinated debentures
  4. preferred stock
  5. common stock
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40
Q

What is the partiy price of a bond for convertable bonds

A

conversion ratio * comon stock price

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41
Q

Bond Maturities

A
  • Term
  • Serial
  • Ballon
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42
Q

Secure Debt

A
  • Mortgage Bond
  • Colateral trust bond
  • equiptment trust bond
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43
Q

What is collateral trust bond?

A

Backed by other securities the issuer owns. E.G. government debt

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44
Q

What is a equiptment trust certficiate

A

backed by equiptment used in the issuers business. most comonly rolling stock

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45
Q

Unsecured debt

A
  • Debenture
  • Subordinated Debt
  • Guanted bond
  • Income bond
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46
Q

What is an income bond?

A

Interest payable only if earned (not sutable for investors seeking income)

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47
Q

What is a guantee bond?

A

Gaunateed by a third party

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48
Q

What is a suborintated debenture?

A

paid last of all debt if issuer is in default

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49
Q

Zero-Coupon Bonds

A
  • Issued at discount
  • Mature at par
  • often used for target date goals
  • high price sensitivity to intrest rate enviorment
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50
Q

Trasury Recipts

A
  • Issued at discount
  • matrue at par
  • discounts accrete (adjust cost basis up)
  • Premiums amortize (adjust cost basis down)
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51
Q

Treasury STRIPS

A
  • Issued at discount and backed by US treasury
  • Mature at par
  • Discount accrete (adjust cost basis up)
  • Premiums amortize (adjust cost basis down)
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52
Q

What does amortize apply to?

A

Premiums. Subtract or adjust cost basis down

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53
Q

What does accrete apply to?

A

Discounts. Add or adjust cost basis up

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54
Q

CMO’s

A
  • Sold by financial instuations
  • Backed by pool of mortages
  • Refinancing and prepayment risk
  • Securities in tranches
  • Investor chosses tranch and signs sutiability
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55
Q

Treasury Note Matruties

A

2, 3, 5, 7, and 10 years

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56
Q

T notes and t bonds are quated?

A

Percent of par in 32nds

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57
Q

What is the price of a t-bill quoted at 1.3%

A

$987. 100% - 1.3% = 98.7% or Par of $987

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58
Q

When does and options agreement have to be completed?

A

he agreement must be signed and returned by the customer within 15 days of account approval

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59
Q

Advertising relating to municipal securities must be approved by

A

A general securities principal or municipal securities principal

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60
Q

In order for an investor to be eligible to receive a previously declared cash dividend, the stock must be purchased

A

before the ex-dividend date.

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61
Q

GO Bond limits

A

stautory debt limits

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62
Q

Muni bonds Voter approval

A
  • Go bonds required
  • REvenue bonds not required
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63
Q

Revenue bond limtis

A

Additional bonds test

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64
Q

Go bond underwiritng

A

Usually compeitive bid

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65
Q

Revenue bond underwriting

A

Usally negotiated bid

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66
Q

GO Bond Analysis based on

A
  • tolerance to taxes
  • debt statements
  • debt ratio
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67
Q

Revnue bond analysis

A
  • Feabitly studies
  • dedt service
  • coverage ratio
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68
Q

Limited Tax Bond

A
  • Type of GO bond
  • Used when avbility to raise taxes is limited
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69
Q

Double barreled bond

A
  • Type of GO Bond
  • Bond issue debt is funded by project revenue but backed by issues full fairth and credit (taxes)
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70
Q

Industrial Revenue bond

A
  • Type of revneue bond
  • back by corporations with lease back payments made to issuer
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71
Q

Special Tax bond

A
  • Type of revneue bond
  • Backed by corpoations with lease back payments made to issuer
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72
Q

Special Assement bond

A
  • Type of revenue bond
  • Only asses property owners who benefit from issue
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73
Q

Special Tax Bond

A
  • Type of revenue bond
  • Backed by taxes other than real esate.
  • Exmplaes are tabacoo and alchol
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74
Q

Moral Obligation Bond

A
  • Type of revenue bond
  • Legislative authority is required to pay back bond holders if revenues are inssufficant
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75
Q

Anticipation Note

A
  • short term borowing in advance of reciving runds from long term debt.
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76
Q

Found in the bond buyer

A
  • GO Index
  • Rev index
  • 30-day visable supply
  • placement ratio
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77
Q

Go Index

A

20 specific GO bonds each with 20-year maturities

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78
Q

Revdex

A

25 specific renvue bonds each with 30-year matrities

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79
Q

30-day vissable supply

A

total par value of all new munciplas to be offered in next 30 days

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80
Q

Placement ratio

A

total par value of all municipals sold/total par value of all muncipals offered within the previous week

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81
Q

Captial Gains Tax for Municipal Bonds

A

Taxable compare cost basis to procceeds

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82
Q

What is the cost basis of a OID bond sold @ 950 sold in year three at a discount?

A
  • $965
  • Discounts Accrete cost basis
  • Adjust up
  • 1000 - 950 = 50
  • 50 / 10 = 5
  • 3 * 5 equals 15
  • 950 + 15 = $965
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83
Q

Tax Equivalent Yeild

A

yeild / (100 - tax bracket)

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84
Q

Tax-Free equivelent yeild

A

coporate yeild x (100 - tax bracket)

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85
Q

Open-End Max sales charge

A

8.5%

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86
Q

Mutual Fudn NAV Calculation

A

fund assets - fund liabilities / number of outstanding shares

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87
Q

Mutual fund public offering price

A

NAV + sales charge

OR

NAV / (100% - sales charge %)

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88
Q

Calculate Mutual Fund Sales Charge

A

pop - nav

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89
Q

Calculate Mutual fund sales charge %

A

POP - NAV / public offering price

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90
Q

Maximum sales charge for variable annuties

A

No max sales charge

91
Q

DPPS

A
  • Business structure that reports to IRS but is not taxed as a business
  • Taxes flow through to partners
  • Income is reportable
  • Expenses are deductable
  • interests in partnership is concisidered illiquid
  • discolves on predetermined dates, assets are liquitdated and procceds go to partners
92
Q

DDP General Partners

A
  • Manages the parterneship
  • Can appoint other to manage assets
  • Unlimited liabiliby
  • Fiducicary and as such can be sued
  • may not compete with partnership
93
Q

DPP Limited Partners

A
  • No management
  • limited liability (cant lose more than invested)
  • Not a fiduciary
  • Can compete with other investmetns
94
Q

Real Estate DPP Governement Asisted Housing

A
  • Tax credits for investing in public housing
  • cash flow via rental income can be suspect
  • appreciation is is minmal
95
Q

Real Estate DPP Exisiting properties

A
  • Imeditate cash flow
  • tends to be safer than new consturction
  • deprciatiion deductions allowed
96
Q

Real Estate DPP New Construction

A
  • No imdeditate cash flow
  • rental income potenial
  • Rends to appericate faster than older propseries
  • deprciation deuctions allowed
97
Q

Real Estate DPP Raw Land

A
  • Appreciation potential only objective
  • Very speculative
  • no deperiaction deuctions for raw land
98
Q

Equiptment Leasing DPP

A
  • Typcially airlines, computers and railroads
  • High depreciation
99
Q

Exploritory Gas DPP

A
  • Driling in new areas
  • high risk and high reward
100
Q

Developmental Oil and Gas DPP

A
  • Drilling in area where gas has been found
101
Q

Balanced Oil and Gas DPP

A
  • Both exporitory and and developmental
102
Q

Income Oil and Gas DPP

A
  • Buying exisiting producing wells
  • Immediate production and income
  • safest of all oil and gas partnerships
103
Q

Types of Non qualifed employeer sponsored plans

A
  • PAyroll deductions
  • Defered comp
  • 457
  • Can descriminate
104
Q

How long can a long margin account fall before maintenance call?

A

Debt / .75

105
Q

Short Market Account Equity

A

CR - SMV = equity

106
Q

How high can SMV rise before maitance call?

A

Credit / 1.3

107
Q

Restricted accounts

A
  • If buying deposit 50% of purchase
  • if selling may only withdrawal 50% of the purchase
108
Q

Rule 147

A

Intrate offerings

109
Q

Rule 144

A
  • Sales by insiders to affiliates
  • Must file concurrently and effective for 90 days
110
Q

Margin minimums

A
  • Less than 2K = purchase price
  • 2K to 4K $2,000
  • Greaters than 4K 50%
111
Q

Matience Call

A
  • Equity below matince limit
  • Depost cash 1x call amount
  • Deposit secutires 2x call amount
112
Q

Hypothication

A
  • investors pledges colateral
113
Q

loan consent

A
  • (optional) allows BD to lend securities to other custoemrs
114
Q

Required Margin account forms

A
  • Credit Agreement
  • Hyopotacation Agreement
115
Q

Day Order

A

Cancel unexacuted order at end of day

116
Q

GTC

A

Any unexcuated portion remains working until the last day of april or october

117
Q

FOK

A

Exacute entire order imediatley or cancel entire order

118
Q

IOC

A
  • exacute any portionn available imeditely
  • cancel any balance remaining
119
Q

AON

A
  • exacute all if available
  • If entire order is not exacuted golder order as GTC
120
Q

Regular Way Settlement for corporate and municipal

A

T + 2

121
Q

Regular Way Settlement for government

A

t + 1

122
Q

Cash Settlement

A

Same day bd approval required

123
Q

RVP and DVP settlement

A

35 days before or after

124
Q

Book value per share

A

book value / number of outstanding share

125
Q

current assets

A

cash and equivlants + accoutns reciviable + inventory

126
Q

Current liabilities

A

accounts payable, accruded wages and taxes payable

127
Q

Working capital

A

current assets - current liabilities

128
Q

current ratio

A

current assets / current liabilities

129
Q

Total Capitilization

A

long-term debt + net worth

130
Q

Debt ratio

A

long-term debt / total capitilization

131
Q

EPS

A

earnings avaialbe / total outstanding shares

132
Q

PE ratio

A

CMV / EPS

133
Q

Securites Act of 1933

A
  • paper act; prospectus act
  • regulates new isses and requires registration of securities
134
Q

Securites and exhange act of 1934

A
  • people and place act
  • regulates exhnages and association persons, requires registration
135
Q

Trust indeture act of 1939

A
  • Applies to corporate bond offerings of greater than 50 million in 12 months
  • establis a contract between the issuer and the trustee for the bond holders benefit
136
Q

ERISA

A
  • Prevent abvuse or misuse of pension funds
  • Applies to private secotor
  • plan particaption, funding, vesting communication, non discrimination and beneficiaries.
137
Q

Regulation S-P

A
  • Enacted by SEC to protect privacy of customer
  • Require intial and annual privacy notices and simple opt out method
138
Q

Regulation SHO

A
  • Mandates a locate requirement for securities to be sold short before the short sale
139
Q

FINRA Rule 2330

A
  • Applies to recomend purchases and 1035 exhanges of defered varable annuties
  • not imeditate annuties
  • disclosure of features, cost and surrender chagres
  • must note is a exhange occreung within last 36 months
140
Q

Regulation A+

A

Small two medium offerings ro raise up to 50 million in 12 months without full registration

141
Q

Regulation A+ tires

A
  • Teir 1 allows up to 20 million
  • Teir 2 allows up to 50 million
142
Q

Regulation D

A

Private placement

143
Q

506(b)

A

Up to 35 nonaccredited investors

144
Q

506(c)

A

Only accredited investors

145
Q

Maixmum 12b-1 no load

A

0.25%

146
Q

Sales volume limite for rule 144

A

1% of the shares or other units of that class outstanding, or (ii) the average weekly trading volume during the four calendar weeks preceding the filing of a Form 144

147
Q

Captial loss you can take each year

A

$3,000

148
Q

maximum 12-b asset-based fee

A

1% (.75% 12b-1 plus .25% servincing fee)

149
Q

Mark up policy guideline

A

5%

150
Q

Diversified Management Company

A

of 75% of the assets no more than 5% of total assets investd in single company

no more than 10% of the voting control of a single company

151
Q

Peneltly for exess ira contribtuions

A

6%

152
Q

Maximum sales charge for open end company

A

8.5%

153
Q

Affiliate or control person

A

owns 10% or more of outstanding shares

154
Q

Maximum sales charge for limited partnerships

A

10%

155
Q

Quote levels

A
  • Lever 1 - inside market
  • Level 2 each market makers quote
  • Level three can enter quote
156
Q

Minamum percentage of mutual fund board members that muse be non interseted member

A

40%

157
Q

Corporate divended exlusion

A

50%

158
Q

Amount of limited partnership assets that must be indentifed to be a specifed program

A

75%

159
Q

Regulation T cash purchases must be paid in full

A

In 4 business days

160
Q

IRS Wash Sales applies to

A

30 days before and 30 days after

161
Q

MAximum time for LOI to be back dated

A

90 days

162
Q

Length of time a cash account can be frozen for non payment

A

90 days

163
Q

Length of time covered by LOI

A

13 months

164
Q

Systematic Risk

A
  • Market
  • Inflation
  • Interest Rate
165
Q

Customer Account Transfer

A
  • Carrying firm = firm they are leaving
  • One business day to validate
  • Three business days to transfer after validation
166
Q

Updating Customer records

A
  • Initially 30 days
  • Then verify every 36 months
167
Q

LifeTime Records

A
  • Minutes
  • Partnership Agreements
  • Stock Certificate
168
Q

Six Year Records

A
  • Blotters
  • General Ledger
  • Stock Ledger
  • Customer Ledgers
  • Customer Account Records
  • Designated Principles
169
Q

Quote levels

A
  • Lever 1 - inside market
  • Level 2 each market makers quote
  • Level three can enter quote
170
Q

Margin minimums

A
  • Less than 2K = purchase price
  • 2K to 4K $2,000
  • Greaters than 4K 50%
171
Q

PAC

A
  • have reduced reinvestment and exteion risks.
  • Most predictable matruirty dates
  • lower risk
172
Q

TACs

A
  • eleveated risk
  • less predictable maturirty dates
  • higher yeilds
173
Q

Rule 80B

A
  • Level 1 7% in S&p 500
  • Level 2 13% decline in S&P
  • Level 3 20% decline in S&P
174
Q

Variable Life Policy loans

A
  • In force for 3 years
  • 75% of cash value available for loan
  • Outstanding loan will be deducted from death benefit
175
Q

The result of dollar cost averaging is to

A

obtain a lower average cost per share than average price per share.

176
Q

A mutual fund’s expense ratio is found by dividing its expenses by its

A

A mutual fund’s expense ratio is calculated by dividing its expenses by its average annual net assets.

177
Q

In a customer’s margin account, a broker-dealer must segregate

A

the excess securities above 140% of the accounts debit balance.

178
Q

To create a credit calendar spread, an investor should

A

buy the near expiration and sell the distant expiration

179
Q

largest deduction in an oil and gas exploratory drilling program

A

Intangible drilling costs

180
Q

If an indenture has a closed-end provision, this means

A

additional issues will have junior liens.

181
Q

One of the most popular index options is the VIX. The VIX trades on

A

the Chicago Board Options Exchange (CBOE).

182
Q

When does a customer have to receive the options disclosure document?

A

At or before the first order

183
Q

A mutual fund’s expense ratio is found by dividing its expenses by its

A

average annual net assets.

184
Q

Cash dividends from real estate investment trusts (REITs) are

A

taxed as ordinary income.

185
Q

Agency Capacity

A

Broker - executes orders on behalf of its clients

186
Q

Principle Capacity

A

Dealer - trades for its own account

187
Q

Who signs the agreement among underwriters for a municipal bond issue?

A

All members of the underwriting syndicate

188
Q

How long must a firm wait after sending the risk disclosure document before executing the first penny stock trade for a new customer?

A

2 days

189
Q

When does a customer have to receive the options disclosure document?

A

At or before the first order

190
Q

What is Sallie Mae used for?

A

student loans for higher education.

191
Q

What is a married put?

A
  • a put option is purchased while the investor is long the underlying stock,
  • this is a protective position
192
Q

Mutual Fund Must Show Statsitcs for

A

1, 5, 10 years or the life of the fund - whichever is shorter

193
Q
A
194
Q

Nonmembers of a syndicate who are assisting in its sale of bonds buy the bonds at a discount called

A

a concession.

195
Q

Which of the following is typically the largest component of a corporate underwriting spread and is received by members of the selling group?

A

Concession

196
Q

intrinsic value calculation

A

current price - strike price

197
Q

A transaction that will create or increase a long position in an option contract is

A

opening purchase transaction

198
Q

Odd lot market sentiment

A

bearish

199
Q

head and shoulder market sentiment

A

bullish

200
Q

Orders on the book adjusted on the ex-date for a cash dividend are

A

those below the current market:

buy limits and sell stops

201
Q

cashless collar

A

premium received on the short call is the same amount or higher than the premium paid for the long put

202
Q

Orders Reduced on the ex date

A

below the market

203
Q

What type of municpial is subject to statutory debt?

A

Go Bonds

204
Q

Protect a short position with a

A

buy stop

205
Q

In a debit spread you wnat the premiums to

A

Widen

206
Q

In a credit spread you want the premiums to

A

narrow

207
Q

Do REITS have to prefile communications?

A

No

208
Q

short-term municipal notes issued in anticipation of funds via grants that the municipality is expecting from the federal government.

A

GANs

209
Q

If XYZ common stock has a $4 dividend, a yield of 4.2%, a price-to-earnings (P/E) ratio of 12, and it is trading at $96, its approximate earnings per share (EPS) is

A

The stock’s P/E ratio is price to EPS. Dividing the stock’s price by the P/E will give the EPS ($96 / 12 = $8).

210
Q

Exercise price for for rights is _________ current market value?

A

below

211
Q

Exercise price for for warrants is _________ current market value?

A

above

212
Q

XYZ Corporation has outstanding a 7% convertible bond currently trading at 102. The bond, which has a conversion price of $50, was issued with an antidilution covenant. If XYZ declares a 10% stock dividend, the new conversion price, as of the ex-date, will be

A

To compute a new conversion price, divide the current conversion price by 100% plus the percent increase in shares. $50 / 110% = $45.45.

213
Q

If one wanted information on municipal fund securities, it would be found on

A

EMMA

214
Q

An underwriting spread is

A

the difference between an offering price and the proceeds to an issuer.

215
Q

Treasury STRIPS and Treasury receipts are quoted based on

A

yield to maturity.

216
Q

A sharing arrangement in which only deductible costs are apportioned to the investor, with the sponsor bearing all capitalized costs is called

A

a functional allocation.

217
Q

Planned amortization class (PAC) collateralized mortgage obligation were designed to provide which of the following benefits, compared to plain vanilla tranches?

A

PACs reduce, but cannot eliminate, prepayment risk for tranche holders.

218
Q

At 3:55 pm ET, a registered representative receives a market order from an officer of XYZ to buy 75,000 shares of XYZ for the company’s account. The registered representative must

A

advise the officer that a safe harbor under SEC Rule 10b-18 no longer exists before placing the order.

219
Q

Do limited partnerships require SEC approval?

A

No

220
Q

The primary tax benefit of an income oil and gas program is

A

depletion

221
Q

Dividends on common stock are taxable when they are

A

received

222
Q

The writer of an equity call option who is assigned must

A

deliver stock within two business days.

223
Q

The 5% markup policy applies to

A

Secondary transactions

Series 7 (6 decks)

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