Practice Areas Flashcards
1
Q
Outstanding Shares
A
Issued Shares - Treasury Shares
2
Q
Treasury Shares
A
Issued Shares - outstanding shares
3
Q
Dividends payable as
A
Cash, stock or property
4
Q
Annual Dividend
A
Most recent quarterly dividend x 4 quarters
5
Q
What is the dividend yield for XYZ trading @42 with a $2 annual dividend?
A
$2/$42 = 4.76% dividend yield
6
Q
What is the dividend declaration date?
A
date divided is declared
7
Q
Who determines the dividend declaration date?
A
The board of directors
8
Q
When is the ex-dividend date?
A
1 day before the record date
9
Q
Who determines the dividend ex date?
A
FINRA of SRO
10
Q
What is the record date?
A
Date a trade must settle by for buyer to receive current dividend
11
Q
Who determines the record date?
A
The board of directors
12
Q
What is the dividend payable date?
A
Date the dividend is distributed
13
Q
Who determines the payable date?
A
The board of directors
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
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
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
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
18
Q
Prefered stock
A
- Fixed par value (assume $100)
- Divdends are fixed stated rate (% of par)
19
Q
Straight Preferred
A
Missed dividens are not payable
20
Q
Adjustable Rate Preferred
A
Dividend tied to antother rate (eg. T-bill rate)
21
Q
Participating Preferred
A
Issuer may pay more than stated dividend
22
Q
Callable Preferred
A
Issuer may buy back shares afer specified date at specified price
23
Q
Cummulative Preferred
A
Missed dividends must be paid before common
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
25
Warrants
* 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
26
ADR's
* 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
27
Where are REITS traded?
exhanges or otc
28
What percentage of assets must be invested in operating income producing real estate or mortgages to qualify as a REIT?
75%
29
What percentage of net operating income must be disbuted for REIT to avoid taxation as a trust?
90%
30
Cupon, Nomial or stated yeild on bond
Annual interest / par value
31
Yeild to maturity
Annualized return if held to maturity
32
Current yeild
Annual interest / current market value
33
Yeild to call
Return reflecting early redemption and accelatrion of discount dain or premium loss.
34
Order of yeilds for bond trading at a discount
1. YTC
2. YTM
3. CY
35
Order of yeilds for bond trading at a premium
36
When will isuers calls bonds?
If they ancipate current interest rates falling.
37
What is the conversion Ratio for convertable bonds?
par / conversion price
38
What is the parity price of common stock for convertible bonds?
market price of bond / converstion ratio
39
Liquatation Priority
1. Secured bonds
2. debentures and general creditors
3. subrinated debentures
4. preferred stock
5. common stock
40
What is the partiy price of a bond for convertable bonds
conversion ratio \* comon stock price
41
Bond Maturities
* Term
* Serial
* Ballon
42
Secure Debt
* Mortgage Bond
* Colateral trust bond
* equiptment trust bond
43
What is collateral trust bond?
Backed by other securities the issuer owns. E.G. government debt
44
What is a equiptment trust certficiate
backed by equiptment used in the issuers business. most comonly rolling stock
45
Unsecured debt
* Debenture
* Subordinated Debt
* Guanted bond
* Income bond
46
What is an income bond?
Interest payable only if earned (not sutable for investors seeking income)
47
What is a guantee bond?
Gaunateed by a third party
48
What is a suborintated debenture?
paid last of all debt if issuer is in default
49
Zero-Coupon Bonds
* Issued at discount
* Mature at par
* often used for target date goals
* high price sensitivity to intrest rate enviorment
50
Trasury Recipts
* Issued at discount
* matrue at par
* discounts accrete (adjust cost basis up)
* Premiums amortize (adjust cost basis down)
51
Treasury STRIPS
* Issued at discount and backed by US treasury
* Mature at par
* Discount accrete (adjust cost basis up)
* Premiums amortize (adjust cost basis down)
52
What does amortize apply to?
Premiums. Subtract or adjust cost basis down
53
What does accrete apply to?
Discounts. Add or adjust cost basis up
54
CMO's
* Sold by financial instuations
* Backed by pool of mortages
* Refinancing and prepayment risk
* Securities in tranches
* Investor chosses tranch and signs sutiability
55
Treasury Note Matruties
2, 3, 5, 7, and 10 years
56
T notes and t bonds are quated?
Percent of par in 32nds
57
What is the price of a t-bill quoted at 1.3%
$987. 100% - 1.3% = 98.7% or Par of $987
58
When does and options agreement have to be completed?
he agreement must be signed and returned by the customer within 15 days of account approval
59
Advertising relating to municipal securities must be approved by
A general securities principal or municipal securities principal
60
In order for an investor to be eligible to receive a previously declared cash dividend, the stock must be purchased
before the ex-dividend date.
61
GO Bond limits
stautory debt limits
62
Muni bonds Voter approval
* Go bonds required
* REvenue bonds not required
63
Revenue bond limtis
Additional bonds test
64
Go bond underwiritng
Usually compeitive bid
65
Revenue bond underwriting
Usally negotiated bid
66
GO Bond Analysis based on
* tolerance to taxes
* debt statements
* debt ratio
67
Revnue bond analysis
* Feabitly studies
* dedt service
* coverage ratio
68
Limited Tax Bond
* Type of GO bond
* Used when avbility to raise taxes is limited
69
Double barreled bond
* Type of GO Bond
* Bond issue debt is funded by project revenue but backed by issues full fairth and credit (taxes)
70
Industrial Revenue bond
* Type of revneue bond
* back by corporations with lease back payments made to issuer
71
Special Tax bond
* Type of revneue bond
* Backed by corpoations with lease back payments made to issuer
72
Special Assement bond
* Type of revenue bond
* Only asses property owners who benefit from issue
73
Special Tax Bond
* Type of revenue bond
* Backed by taxes other than real esate.
* Exmplaes are tabacoo and alchol
74
Moral Obligation Bond
* Type of revenue bond
* Legislative authority is required to pay back bond holders if revenues are inssufficant
75
Anticipation Note
* short term borowing in advance of reciving runds from long term debt.
76
Found in the bond buyer
* GO Index
* Rev index
* 30-day visable supply
* placement ratio
77
Go Index
20 specific GO bonds each with 20-year maturities
78
Revdex
25 specific renvue bonds each with 30-year matrities
79
30-day vissable supply
total par value of all new munciplas to be offered in next 30 days
80
Placement ratio
total par value of all municipals sold/total par value of all muncipals offered within the previous week
81
Captial Gains Tax for Municipal Bonds
Taxable compare cost basis to procceeds
82
What is the cost basis of a OID bond sold @ 950 sold in year three at a discount?
* $965
* Discounts Accrete cost basis
* Adjust up
* 1000 - 950 = 50
* 50 / 10 = 5
* 3 \* 5 equals 15
* 950 + 15 = $965
83
Tax Equivalent Yeild
yeild / (100 - tax bracket)
84
Tax-Free equivelent yeild
coporate yeild x (100 - tax bracket)
85
Open-End Max sales charge
8.5%
86
Mutual Fudn NAV Calculation
fund assets - fund liabilities / number of outstanding shares
87
Mutual fund public offering price
NAV + sales charge
OR
NAV / (100% - sales charge %)
88
Calculate Mutual Fund Sales Charge
pop - nav
89
Calculate Mutual fund sales charge %
POP - NAV / public offering price
90
Maximum sales charge for variable annuties
No max sales charge
91
DPPS
* 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
DDP General Partners
* Manages the parterneship
* Can appoint other to manage assets
* Unlimited liabiliby
* Fiducicary and as such can be sued
* may not compete with partnership
93
DPP Limited Partners
* No management
* limited liability (cant lose more than invested)
* Not a fiduciary
* Can compete with other investmetns
94
Real Estate DPP Governement Asisted Housing
* Tax credits for investing in public housing
* cash flow via rental income can be suspect
* appreciation is is minmal
95
Real Estate DPP Exisiting properties
* Imeditate cash flow
* tends to be safer than new consturction
* deprciatiion deductions allowed
96
Real Estate DPP New Construction
* No imdeditate cash flow
* rental income potenial
* Rends to appericate faster than older propseries
* deprciation deuctions allowed
97
Real Estate DPP Raw Land
* Appreciation potential only objective
* Very speculative
* no deperiaction deuctions for raw land
98
Equiptment Leasing DPP
* Typcially airlines, computers and railroads
* High depreciation
99
Exploritory Gas DPP
* Driling in new areas
* high risk and high reward
100
Developmental Oil and Gas DPP
* Drilling in area where gas has been found
101
Balanced Oil and Gas DPP
* Both exporitory and and developmental
102
Income Oil and Gas DPP
* Buying exisiting producing wells
* Immediate production and income
* safest of all oil and gas partnerships
103
Types of Non qualifed employeer sponsored plans
* PAyroll deductions
* Defered comp
* 457
* Can descriminate
104
How long can a long margin account fall before maintenance call?
Debt / .75
105
Short Market Account Equity
CR - SMV = equity
106
How high can SMV rise before maitance call?
Credit / 1.3
107
Restricted accounts
* If buying deposit 50% of purchase
* if selling may only withdrawal 50% of the purchase
108
Rule 147
Intrate offerings
109
Rule 144
* Sales by insiders to affiliates
* Must file concurrently and effective for 90 days
110
Margin minimums
* Less than 2K = purchase price
* 2K to 4K $2,000
* Greaters than 4K 50%
111
Matience Call
* Equity below matince limit
* Depost cash 1x call amount
* Deposit secutires 2x call amount
112
Hypothication
* investors pledges colateral
113
loan consent
* (optional) allows BD to lend securities to other custoemrs
114
Required Margin account forms
* Credit Agreement
* Hyopotacation Agreement
115
Day Order
Cancel unexacuted order at end of day
116
GTC
Any unexcuated portion remains working until the last day of april or october
117
FOK
Exacute entire order imediatley or cancel entire order
118
IOC
* exacute any portionn available imeditely
* cancel any balance remaining
119
AON
* exacute all if available
* If entire order is not exacuted golder order as GTC
120
Regular Way Settlement for corporate and municipal
T + 2
121
Regular Way Settlement for government
t + 1
122
Cash Settlement
Same day bd approval required
123
RVP and DVP settlement
35 days before or after
124
Book value per share
book value / number of outstanding share
125
current assets
cash and equivlants + accoutns reciviable + inventory
126
Current liabilities
accounts payable, accruded wages and taxes payable
127
Working capital
current assets - current liabilities
128
current ratio
current assets / current liabilities
129
Total Capitilization
long-term debt + net worth
130
Debt ratio
long-term debt / total capitilization
131
EPS
earnings avaialbe / total outstanding shares
132
PE ratio
CMV / EPS
133
Securites Act of 1933
* paper act; prospectus act
* regulates new isses and requires registration of securities
134
Securites and exhange act of 1934
* people and place act
* regulates exhnages and association persons, requires registration
135
Trust indeture act of 1939
* 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
ERISA
* Prevent abvuse or misuse of pension funds
* Applies to private secotor
* plan particaption, funding, vesting communication, non discrimination and beneficiaries.
137
Regulation S-P
* Enacted by SEC to protect privacy of customer
* Require intial and annual privacy notices and simple opt out method
138
Regulation SHO
* Mandates a locate requirement for securities to be sold short before the short sale
139
FINRA Rule 2330
* 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
Regulation A+
Small two medium offerings ro raise up to 50 million in 12 months without full registration
141
Regulation A+ tires
* Teir 1 allows up to 20 million
* Teir 2 allows up to 50 million
142
Regulation D
Private placement
143
506(b)
Up to 35 nonaccredited investors
144
506(c)
Only accredited investors
145
Maixmum 12b-1 no load
0.25%
146
Sales volume limite for rule 144
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
Captial loss you can take each year
$3,000
148
maximum 12-b asset-based fee
1% (.75% 12b-1 plus .25% servincing fee)
149
Mark up policy guideline
5%
150
Diversified Management Company
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
Peneltly for exess ira contribtuions
6%
152
Maximum sales charge for open end company
8.5%
153
Affiliate or control person
owns 10% or more of outstanding shares
154
Maximum sales charge for limited partnerships
10%
155
Quote levels
* Lever 1 - inside market
* Level 2 each market makers quote
* Level three can enter quote
156
Minamum percentage of mutual fund board members that muse be non interseted member
40%
157
Corporate divended exlusion
50%
158
Amount of limited partnership assets that must be indentifed to be a specifed program
75%
159
Regulation T cash purchases must be paid in full
In 4 business days
160
IRS Wash Sales applies to
30 days before and 30 days after
161
MAximum time for LOI to be back dated
90 days
162
Length of time a cash account can be frozen for non payment
90 days
163
Length of time covered by LOI
13 months
164
Systematic Risk
* Market
* Inflation
* Interest Rate
165
Customer Account Transfer
* Carrying firm = firm they are leaving
* One business day to validate
* Three business days to transfer after validation
166
Updating Customer records
* Initially 30 days
* Then verify every 36 months
167
LifeTime Records
* Minutes
* Partnership Agreements
* Stock Certificate
168
Six Year Records
* Blotters
* General Ledger
* Stock Ledger
* Customer Ledgers
* Customer Account Records
* Designated Principles
169
Quote levels
* Lever 1 - inside market
* Level 2 each market makers quote
* Level three can enter quote
170
Margin minimums
* Less than 2K = purchase price
* 2K to 4K $2,000
* Greaters than 4K 50%
171
PAC
* have reduced reinvestment and exteion risks.
* Most predictable matruirty dates
* lower risk
172
TACs
* eleveated risk
* less predictable maturirty dates
* higher yeilds
173
Rule 80B
* Level 1 7% in S&p 500
* Level 2 13% decline in S&P
* Level 3 20% decline in S&P
174
Variable Life Policy loans
* In force for 3 years
* 75% of cash value available for loan
* Outstanding loan will be deducted from death benefit
175
The result of dollar cost averaging is to
obtain a lower average cost per share than average price per share.
176
A mutual fund's expense ratio is found by dividing its expenses by its
A mutual fund's expense ratio is calculated by dividing its expenses by its average annual net assets.
177
In a customer's margin account, a broker-dealer must segregate
the excess securities above 140% of the accounts debit balance.
178
To create a credit calendar spread, an investor should
buy the near expiration and sell the distant expiration
179
largest deduction in an oil and gas exploratory drilling program
Intangible drilling costs
180
If an indenture has a closed-end provision, this means
additional issues will have junior liens.
181
One of the most popular index options is the VIX. The VIX trades on
the Chicago Board Options Exchange (CBOE).
182
When does a customer have to receive the options disclosure document?
At or before the first order
183
A mutual fund's expense ratio is found by dividing its expenses by its
average annual net assets.
184
Cash dividends from real estate investment trusts (REITs) are
taxed as ordinary income.
185
Agency Capacity
Broker - executes orders on behalf of its clients
186
Principle Capacity
Dealer - trades for its own account
187
Who signs the agreement among underwriters for a municipal bond issue?
All members of the underwriting syndicate
188
How long must a firm wait after sending the risk disclosure document before executing the first penny stock trade for a new customer?
2 days
189
When does a customer have to receive the options disclosure document?
At or before the first order
190
What is Sallie Mae used for?
student loans for higher education.
191
What is a married put?
* a put option is purchased while the investor is long the underlying stock,
* this is a protective position
192
Mutual Fund Must Show Statsitcs for
1, 5, 10 years or the life of the fund - whichever is shorter
193
194
Nonmembers of a syndicate who are assisting in its sale of bonds buy the bonds at a discount called
## Footnote
a concession.
195
Which of the following is typically the largest component of a corporate underwriting spread and is received by members of the selling group?
Concession
196
intrinsic value calculation
current price - strike price
197
A transaction that will create or increase a long position in an option contract is
opening purchase transaction
198
Odd lot market sentiment
bearish
199
head and shoulder market sentiment
bullish
200
Orders on the book adjusted on the ex-date for a cash dividend are
those below the current market:
buy limits and sell stops
201
cashless collar
premium received on the short call is the same amount or higher than the premium paid for the long put
202
Orders Reduced on the ex date
below the market
203
What type of municpial is subject to statutory debt?
Go Bonds
204
Protect a short position with a
buy stop
205
In a debit spread you wnat the premiums to
Widen
206
In a credit spread you want the premiums to
narrow
207
Do REITS have to prefile communications?
No
208
short-term municipal notes issued in anticipation of funds via grants that the municipality is expecting from the federal government.
GANs
209
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
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
Exercise price for for rights is _________ current market value?
below
211
Exercise price for for warrants is _________ current market value?
above
212
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
To compute a new conversion price, divide the current conversion price by 100% plus the percent increase in shares. $50 / 110% = $45.45.
213
If one wanted information on municipal fund securities, it would be found on
EMMA
214
An underwriting spread is
the difference between an offering price and the proceeds to an issuer.
215
Treasury STRIPS and Treasury receipts are quoted based on
yield to maturity.
216
A sharing arrangement in which only deductible costs are apportioned to the investor, with the sponsor bearing all capitalized costs is called
a functional allocation.
217
Planned amortization class (PAC) collateralized mortgage obligation were designed to provide which of the following benefits, compared to plain vanilla tranches?
PACs reduce, but cannot eliminate, prepayment risk for tranche holders.
218
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
advise the officer that a safe harbor under SEC Rule 10b-18 no longer exists before placing the order.
219
Do limited partnerships require SEC approval?
No
220
The primary tax benefit of an income oil and gas program is
depletion
221
Dividends on common stock are taxable when they are
received
222
The writer of an equity call option who is assigned must
deliver stock within two business days.
223
The 5% markup policy applies to
Secondary transactions
