Q Bank FlashCards
To profit from temporary price differences between markets or securities
Arbitrage
Characteristic of gifts into an UGMA or UTMA account
Irrevocable
Short Put Option
Obligated to Buy
Dollar Bond
A Bond Quoted at a Price
T-Note Quote of 99.16
995
Securities trades based on predicted price movements
Market timing
BD may base a markup on its cost of this stock
Inactively traded stock
Equipment trust certificates
Debt Instrument Used to Acquire Rolling Stock
Six-Year Records
Blotters General Ledger Stock Record Customer Ledgers Customer Account Records Principal designations
Quantity purchase discounts for mutual fund offers
Breakpoints
Executed outside AP employment
Private securities transaction
Convert investment for equal investment in new fund in the family at NAV
Exchange privilege
Exchange privilege is the opportunity given to mutual fund shareholders to exchange their investment in a fund for another fund within the same fund family.
Investors who take advantage of exchange privilege within a fund family are able to rotate their investment strategy based on market conditions and generally take advantage of the various funds offered by the mutual fund company.
Certain exchange fees or capital gains taxes may apply, though the former is usually very minimal.
Working capital
Current Assets - Current Liabilities
Primary Market
Market where new securities are issued
Stating that a fund is recommended by the U.S government, the FDIC, or a bank
An unlawful representation
How can you hedge a portfolio without writing anything against the portfolio?
Buy puts on a broad-based index.
Not FDIC insured, not a bank deposit, subject to market risk
Securities purchased on the premises of a networking bank
A written message from a customer stating a grievance with a securities trade
Customer complaint
The number of days to obtain customer option agreement
Within 15 days of account approval
Payments in kind by institutional investors to BDs for research.
Soft dollars
Investment by borrowing a portion of the purchase price
Leverage
What is a moving average?
the average price over a specified period of time
Modern portfolio theory (MPT) Goal
Negative coorolation
It suggests that a conservative investor can do better by choosing a mix of low-risk and riskier investments than by going entirely with low-risk choices.
Annuities with surrender charges lasting longer than other annuities
Bonus annuities
SEC or State action if registration statement is incomplete
Stop order
Maximum loss on a short call
Unlimited
Short Call Option
Obligated to Sell
Fundamental Analysis
Analysis that concentrates on economic trends, measured by the quantity
Prepaid tuition and education savings plans
529 plans
Does the delivery date of the OCC Disclosure Document need to be on the New Account Form?
Yes
Red Herring
Preliminary prospectus
Lowest investment-grade bond rating
A support line in a chart occurs when
traders feel the commodity or security is undervalued
When must a market order be executed?
Immediately at the best price
Extent which portfolio return exceeds or falls short of its expected return
Alpha
Alpha 3 is 3% better
Alpha -5 is 5% worse
Lifetime Records
Articles of incorporation Minutes from the board meetings Stock certificate book
Considerations for Alternative Investments
Lack of regulation
Low transparency
Low liquidity High fees
Speculation
Higher-than-average returns for higher-than-average risks
Order ticket marked this way for a sale of stock not owned
Short sale
State requirement for securities listed on a stock exchange as well as registered investment companies
Notice filing
Purchase Method for an immediate annuity
Lump sum payments
Treasury Stock
Stock issued and subsequently reacquired by the issuer
Net Worth Requirement (Investment Advisers)
10k
A lawful way an AP may suggest to guard a long position against loss
Long puts in that security
A person who, as part of business, is paid for advice on securities trading
Investment advisor
What is the definition of a retail account?
A customer account is an account that is opened by any natural person with a broker-dealer.
Possible operations disruption requires one
Business continuity plan (BCP)
Which is higher initial or maintenance margin?
initial, always
Minimum frequency to review supervisory procedures
Annually
Zero Coupon
Debt Instrument Sold at a Discount with Return at Maturity
What is a limit order?
an order to buy or sell a commodity or security at a specific price or better.
Public School System Retirement Plan
403b
Obligated to maintain fair and orderly markets for assigned securities
Designated Market Makers (DMM)
What is technical analysis?
price predictions using price patterns and volume
Minimum net worth of registered investment company
100k
Consent to BD to pledge customer margin securities
Hypothecation agreement
What entity standardizes option contracts, guarantees performance, and issues options?
Created and owned by the exchanges that trade options, the Options Clearing Corporation (OCC).
Three-Year Records (Broker-dealers)
Communications with the public
FOCUS reports
Trial balances
Form U4, Form U5, and fingerprint cards of terminated personnel
Customer confirmations
Order tickets
Subsidiary ledgers
A list of every office where business is regularly conducted
Associated persons’ compensation records
The firm’s written supervisory procedures
Recordings of telephone conversations of firms required to record calls
The names and dates for all supervisory personnel
Basis for determining distributions from a variable annuity
Assumed Interest Rate (AIR)
Company limited to no more than 60% of interested persons on BOD
Investment company
Proceeds from this offering go to the selling shareholder
Secondary market
Commercial paper and bankers’ acceptances typically mature in this time
270 days to maturity (9 months or less)
What is a “stop order”?
It is an order that becomes a live market order when a particular price level specified by the customer is reached or traded through.
Commdity exchanges are registered with
The Commodies Futures Trading Commission (CFTC)
Trade delivery date
Settlement date
Nonfinancial considerations of customer profile
Age
marital status
employment number
ages of children
tax status
risk tolerance
Maturity Coupon Issuer
Three qualities of a bond compared by IRS for Wash Sale review
Given the following information, calculate the risk-adjusted return.
91-day T-bill rate: 4%
Actual return: 14%
Beta = 1.4
CPI: 3%
Standard deviation: 5.0
Any question asking about the risk-adjusted return is going to be referring to the Sharpe ratio. This is shown as a simple number and is calculated by subtracting the risk-free rate (91-day T-bill) from the actual return and dividing that remainder by the standard deviation. In this example, 14% − 4% = 10% divided by 5 = 2. A positive number is good and the higher the better.
2%
Which 2 are most associated risk with a U. S. Treasury bond?
Reinvestment & Interest rate risk
LEAPS, the acronym for
long-term equity anticipation securities, have expiration dates that can run more than three years compared with the nine months for standard option contracts. Because time value is a direct function of the length of the option, the longer the time until expiry, the greater the potential time value.
George owns XYZ stock. Based on recent analyst projections and George’s own research, he believes XYZ’s price will remain flat over the next few months. Accordingly, which strategy would George most likely employ?
When the price is expected to stay flat, selling an option is a way to profit with little risk of the option being exercised. Why sell the call instead of the put? Because George owns the XYZ stock, this is a covered call and entails no downside risk. Selling the put would expose George to potentially significant loss if the price of XYZ should suffer a large decline.
analyzing a security’s standard deviation
Approximately two-thirds, or 68.26%, of observations will be within one standard deviation on either side of the mean. Approximately 95% will be within two standard deviations and approximately 99% will be within three.
The probable return is computed by
taking the probability of each possible return outcome and multiplying it by the return outcome itself
The common stock of companies within which industry sector would be most adversely affected by an increase in the general level of interest rates?
Utilities are generally very heavily funded with debt. If interest rates go up, their new debt will be at higher interest rates, causing lower earnings available for common stocks.
A bond’s yield to maturity reflects its
IRR
An investor would write a call option to
Income
The writing (selling) of an option always generates premium income to the writer. If the call is exercised, the writer must sell the stock, so this is not a way to add to your portfolio. In general, option writers only realize short-term gains, not long-term gains. If the question had said this was a covered call, then the second best choice would have been to protect the long position (not the premium).
An analyst would use the discounted cash flow method in an attempt to find
Fair value of a security
DCF uses the present value of future cash flows, based on a specified discount (interest) rate, to evaluate the price that a security should be selling for in the market. If the current market price of the security is less than this value, it has a positive net present value (NPV) and should be a good investment. The opposite is true if there is a negative NPV (the market price is higher than that computed under the DCF method).
The federal law dealing with privacy matters for financial institutions is
Regulation SP
Regulation SP deals with privacy of customer information for financial institutions. Regulation FD requires public companies to make full disclosure of material information to all investors at the same time. HIPAA deals with privacy regarding health matters, and the ACA is the Affordable Care Act, which is better known as Obamacare.
The revocation or suspension of a federal covered investment adviser’s registration under the Investment Advisers Act of 1940 may be appealed
to the U.S. Court of Appeals serving the district where the order was issued within 60 days of its issuance.
A nonqualified plan designed to provide additional retirement benefits limited to a select group of management or highly-compensated employees is called
SERP - A supplemental executive retirement plan (SERP) is a nonqualified plan designed to provide additional retirement benefits limited to a select group of management or highly-compensated employees.
Which of the following retirement plans is not legally required to establish vesting, funding, and eligibility requirements?
A)
Payroll deduction plan
B)
Profit-sharing plan
C)
Keogh plan
D)
Defined benefit pension plan
A payroll deduction plan is a retirement plan not subject to eligibility, vesting, or funding standards as required by ERISA plans. A payroll deduction plan is a nonqualified retirement plan. Profit-sharing, pension, and Keogh plans must have established standards.
A state securities Administrator may do all of the following except
A)
issue a subpoena to registrants who are out of state.
B)
issue interpretive opinions.
C)
require the use of specific forms.
D)
issue an injunction after a hearing.
A state securities Administrator may not issue injunctions, which are issued by courts, not administrative agencies. Administrators may require specific forms to be used, issue subpoenas to registrants who are out of state, and issue interpretive opinions.
A person who has no place of business in this state would not be considered a broker-dealer if he effects transactions in this state exclusively with all of the following except
A)
insurance companies.
B)
investment advisers.
C)
the issuers of the securities involved in the transaction.
D)
other broker-dealers.
Investment advisors
The Uniform Securities Act excludes from the definition of broker-dealer, a person who has no place of business in this state if he effects transactions in this state exclusively with or through
the issuers of the securities involved in the transactions,
other broker-dealers, or
banks, savings institutions, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, pension or profit-sharing trusts, or other financial institutions or institutional buyers.
Please note that investment advisers are not included in this list. What is confusing is that the USA offers almost the exact same exclusion for investment advisers and that list includes other investment advisers as well as broker-dealers.
