Questions I Got Wrong Flashcards
The minimum dollar amount required for a negotiable CD is:
$100,000
What would lead to a lower dividend yield?
Stable dividend, rising market price
When you were single, you purchased a variable life insurance policy. You have since gotten married and want to exchange it for a whole life policy to protect your family. How long from the policies issuance do you have to make the conversion?
24 months
As a registered municipal bond representative for your broker dealer, you have been given discretion over the account of a physician residing in New York. The client’s profile shows that he is conservative, avoids investment risk, and seeks long-term growth potential. What do you deem to be the most suitable to include in the physician’s portfolio?
New York transit authority revenue bond rated Aa
Under the front load contribution method for 529 plans, the maximum amount that may be contributed tax-free by a couple is:
$110,000
A long established mutual fund company wants to place ads in the financial papers to try to attract new investors, what do they need to do with FINRA?
The ad must be filed with FINRA 10 days after it is used
Outstanding stock is best described as:
The number of shares that the public owns
What percentage of employee contributions to a 403b plan are vested after one year?
All employee contributions vest immediately
What is the maximum maturity for a CD?
There’s no maximum maturity
An underwriter that is taking a new issue of securities to market can do what prior to the following date?
Prepare the registration statement
The provisions of ERISA would apply to:
The profit sharing plan
What will receive a MIG rating?
Tax anticipation note
Discounting and investments expected cash flows to present value determines
Net present value
What type of investment have historically shown a great deal of exposure to regulatory risk?
Limited partnerships
The largest component of the money supply (m1) is:
Currency
What would not be suitable to recommend for investors primarily seeking income?
Sector fund
The investment company act of 1940 specifies that no more than 49% of the directors of an investment company can be
Interested persons
If a person who is a lawyer for a bank write to daily investment column for the local newspaper, what would be true about their status?
The person is not considered an investment advisor because the writers for the newspaper, magazines and business journals who do not give specific investment situations to individuals are exempt
As the CPI rises, what happens to bond prices, interest rates and consumer prices?
Bond prices are falling while interest rates and consumer prices are rising
What are deducted from the separate account for a variable life policy?
Expense risk fee, mortality risk fee, management fee
List the following order from least important to most important factors when considering an investing in a DPP
Liquidity, safety, tax considerations, profitability
An investor who is over 50 may contribute how much to their traditional IRA under the catch-up option?
7,000
Which act states that the trustee will diversify unless there is a good reason not to
Uniform prudent investor act
Which preferred stock is likely to have the lowest state of dividend rate?
Cumulative preferred
What type of bond only promises to pay the investor interest if the corporation earns enough money to do so?
Adjustment bond
What is the only investment that would allow investors to move money between portfolios at the NAV?
Open end mutual fund
What is the policy that determines how to manage the budget and government spending?
Fiscal policy
What is true as it relates to the collection ratio?
The collection ratio is concerned with the amount of tax assessed and the amount of tax collected.
Also, the lower the collection ratio the higher the risk associated with the bonds.
All variable insurance policies must offer the investor. How many days of a free look period?
45
Yield to maturity formula for a bond purchased at a premium
( annual income - annual premium) / ( Price paid + par) / 2
What type of risk do zero coupon bonds eliminate?
Reinvestment risk
The term principal shareholder means any person who is directly or indirectly the beneficial owner of more than what percent of any class of equity security of an issuer?
20%
The bonds duration does not take into consideration the what of an issuer?
Credit quality
If a corporation owns at least 20% of the distributing corporation, it must be declared as income how much of the dividends received?
20%
If the corporation owns less than 20% of the distributing corporation, it must declare how much of the dividends received?
30%
Parity price of a preferred stock formula
CMV of the preferred stock
/
# of shares
If the Federal reserve board wants to stimulate the economy, what is the least likely they will do?
Change the reserve requirement
What kind of taxes are not progressive?
Sales taxes
What is a requirement for an offer of rescission?
It must be in writing
How long is a state securities registration statement effective?
For one year or until all securities are sold and can be extended, providing there’s no stop order
Which type of life insurance policy allows policyholder to determine when the premiums are paid and how large those payments are?
Variable universal life insurance policy
When can an investor in a variable annuity change their payout option?
May never change their payout option once it has been set
What is the purpose of a consent to service of process?
It gives the administrator the authority to receive service of process against the applicant in non-criminal proceedings
What type of annuity would provide the highest monthly payout on an immediate annuity?
Straight life annuity always has the highest monthly payouts of the options with life contingency
Can a state administrator execute a search warrant?
No
The net capital requirement for an agent cannot exceed?
The fee for each state in which they are registered
The filing date for a new issue is considered to be?
The date of post mark
If FINRA offers a respondent, a minor rule violation letter for an offense, the maximum fine is?
$2,500
The internal rate of return is the point at which the net present value of an investment equals?
Zero
The three key projections for estimating the lump sum that a person will need at retirement are?
Life expectancy, inflation rate, investment return
A bond certificate issued will not contain?
Par value of the bond
Bond interest starts to accrue on a new issue of bonds on which date?
The dated date
Under the uniform security act, the statue of limitations for civil action is?
2 years from discovery, 3 years from occurrence
The assumed interest rate only affects what?
The value of the annuity unit and the amount of the annuity payment
The prime rate is?
The rate that banks charge their most credit worthy corporate customers on loans
As per FINRA rule, 2210 electronic communications with the public must be based on what?
Must be based on the principles of fair dealing
A respondent who is unhappy with the order of the administrator may appeal it to the court system within how many days?
60
Which ratios are used to evaluate a company’s earnings?
P/E ratio and earnings per share
A client who is purchasing shares under regulation A offering must receive what?
An offering circular 48 hours prior to the sale
The federal funds rate is?
The rate that member banks charge each other for overnight loans
The FRB wants to stimulate the economy. What is the least likely they will do?
Change the reserve requirement
The private advisor exemption is available to advisors who have given advice to how many people and how many months?
15 people in 12 months
What is the only investment that would allow the investor to move money between portfolios at the NAV?
Opened and mutual fund
When applying prudent investor standards, the focus is the?
Investors total portfolio
What type of insurance policy provides the insured with a guaranteed death benefit equal to the face amount of the policy, plus a guaranteed cash value which the policy holder may borrow against?
Whole life
A firm, acting on its own account as a principal, is considered a what?
A dealer
An investor may only liquidate the variable rate demand obligation when?
By putting the security to the dealer or to the third party on the reset date
How often can an investor transfer their IRA?
As often as they like
How often can an investor roll over their IRA?
Can only be done once a year
What type of retirement plan does not need to follow ERISA standards for vesting eligibility or funding?
Deferred compensation plans
Under modern portfolio theory all portfolios should operate how?
At least equal to the efficient frontier
What is included in the safe harbor under ERISA 404c?
The plan must offer a minimum of three investment portfolios and the participant must be given ample opportunity to move money between the portfolios offered
Feel curve often inverts when interest rates are what?
When interest rates are relatively high but are expected to fall in the near future
What is most useful in determining the price volatility of a bond to a significant change in interest rates?
Convexity
What is the dividend payout ratio formula?
Annual dividends per common share / Earnings per share ......... So to calculate, the dividends per share equals... Annual cash dividends / Number of common shares outstanding
The Federal reserve Board wants to simulate the economy. What will they lease likely do?
Change the reserve requirement
If an agent decides to file an appeal of the administrator’s order, it must be done in how many days?
60 days
The prime rate is the rate that banks charge who?
There are most creditworthy corporate customers on loans
For state tax purposes, the IRS will include which of the following when determining the estates tax liability?
Assets transferred within 3 years of death
What type of risk only relates to fixed income securities?
Credit risk is the risk of default
Alone taken out by a limited partnership where there is no minimum payment liability for the limited partners is known as what kind of loan?
A non-recourse loan
What are loans with no personal liability for repayment known as?
Non-recourse loans
The firm acting for the accounts of others as an agency is known as a what?
Broker
Corporations exclude much or all of the income received except for income received from holding what kind of security?
For holding another corporation’s debentures
Which plans are typically funded with contributions deductible from income for purposes of figuring federal income tax?
457 and 403b
For a state tax purposes, the IRS will include assets transferred within how many years of death when determining the state’s tax liability?
3 years
what is not attached to a fully registered corporate Bond?
Coupons
Which person is a fiduciary?
Investment adviser
In order for an investor to be suitable to purchase a CMO they should be least concerned with what?
Liquidity
What handles trade practice complaints for FINRA?
Department of enforcement
1 mil when determining a tax liability for real property would be best described as?
$1 of tax for every $1,000 of assessed value of property
A new registering through coordination must send the state securities administrator how many copies of the prospectus?
3
Income from which type of bond is most likely to be subject to high income investors to the alternative minimum tax?
Industrial revenue Bond
According to finra’s code of arbitration the statute of limitations is how many years?
6 years
The Federal reserve board does not set which rate?
Prime rate
