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Series 7 Study > Random > Flashcards

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Series 7 Top-off Exam flashcards
1
Q

Stock Dividends

A

Not taxable at the time of receipt. The taxable event occurs when the the shares are sold.

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2
Q

$3,000

A

The amount of capital losses that can be used to offset capital gains in any given year.

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3
Q

Prospectus Delivery Requirements

A

Non-listed IPO 90 days

Non-listed follow-on offering 40 days

IPO on the NYSE or Nasdaq 25 days

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4
Q

Regulation A

A

If an issuer offers a new issue of securities valued at 5M or less sold over a 12 month period then the offering is exempt under the Act.

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5
Q

Corporate Dividend Exclusion

A

Corps are given preferential tax treatment on any dividends that they receive from other corporations.

If a Corp owns less than 20% of the company, 70% of he dividends are excluded from corporate income.

If owns more than 20% then 80% is excluded from income.

Dividend from REITs does not apply.

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6
Q

Bona Fide Quote

A

Is one in which the dealer is prepared to buy or sell on, as opposed to a workable, nominal or subject quote.

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7
Q

Copy of the account record

A

A firm must be able to provide to the customer with 30 days of opening the account.

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8
Q

IRA Vesting

A

Investors are immediately vested in their IRA.

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9
Q

Cost Basis After Exercising Option

A

The value of the shares (based on strike price) plus the cost of the call.

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10
Q

Prime Broker

What do they provide for a fund?

A

They would supply clearing services, lending services for margin able transactions, as well as back office support including cash management, account statements, and transaction processing.

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11
Q

When does covered call writing normally take place?

A

In a stable market.

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12
Q

When must settlement occur for a new muni issue?

A

Within 30 calendar days after the issuer delivers the securities to the syndicate.

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13
Q

When do index options settle and how?

A

They settle the next day and in cash.

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14
Q

Work-Out

A

Means that a quote is approximate, or nominal. As with a subject quote, the OTC trader that supplied the quote will most likely negotiate with a number of market makers to get the customers securities sold or bought.

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15
Q

Build America Bonds

A

Created under the Economic Recovery and Reinvestment Act of 2009 to assist in reducing costs to issuing municipalities and stimulate the economy.

Two types

Direct Payment BABs - provide the muni with payment from the Treasury and Tax credit

Issuer BABs - provide the bond holder with a federal income tax credit.

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16
Q

Depletion

A

Is only applicable to natural resources such as mining and timber. It is not applicable to real estate.

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17
Q

Open end fund

A

Think mutual fund

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18
Q

Closed end fund

A

Functions more like an ETF than a mutual fund. Launched through an IPO in order to raise money and then trade in the open market just like a stock or an ETF.

They issue a set amount of shares and the actual prices is affected by the supply and demand, allowing it to trade at prices above or below its actual value.

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19
Q

Break-even for covered call writer

A

Is the purchase price less premiums received.

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20
Q

Visible supply does not include…

A

Muni notes

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21
Q

Long the lower call is….

A

Bullish

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22
Q

Short the lower call is…

A

Bearish

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23
Q

How do you protect a stock that you have sold short?

A

By buying a call on the underlying stock.

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24
Q

Defeasement

A

When bonds are escrowed to maturity, the outstanding debt is considered defeased.

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25
Q

Are listed options adjusted for cash dividends?

A

No!

Option prices remain the same after a cash dividend is declared.

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26
Q

What are ETNs?

A

ETNs are issued by financial institutions and therefore the creditworthiness of the issuer should be a concerning factor.

ETNs are debt instruments not equity instruments. They have a final payment at maturity based on the return of a single stock, a basket of stocks or an equity index.

27
Q

Allied Members

A

Are executive officers, directors, or holders of more than 5% of an NYSE member firm’s voting stock. They are not allowed to trade on the exchange floor.

28
Q

Portfolio Income

A

Includes dividend, interest, and net capital gains derived from the sale of securities.

29
Q

Broker’s Broker

A

Municipal brokers’ brokers generally purchase and sell securities on an anonymous basis for institutional clients. They are not in the business of making a market; therefore, they maintain no inventory.

30
Q

Which type of order is reduced on the order book on the ex-dividend date?

A

Only orders placed below the market prices are reduced for cash dividends on the order book.

Buy limits and sell stops are entered below the market prices.

31
Q

I bonds

A

Interest paid on I bonds is exempt from state and local levels but is taxable at the federal level.

32
Q

What does amortization do?

A

It reduces the interest income and cost basis. If the bond is held to maturity, the cost basis will have been amortized down to par. Therefore, at maturity, there is no reported capital loss.

33
Q

True interest cost (TIC)

A

When an issuer discounts future interest payments to arrive at present value, the interest cost method being used is the true interest cost. This method takes into consideration the time value of money.

34
Q

Joint tenants with right of survivorship

A

Is a type of account in which co-owners have a right of survivorship, meaning that if one owner dies, that owners interest in the property will pass to the surviving owner or owners.

35
Q

Front-end load

A

The deduction of commission fees and expenses from mutual fund shares are the time of purchase.

Deducted from the investment amount and thus, lowers the size of the investment

36
Q

UGMA or UTMA account

A

The donor may name himself the custodian of this type of account. No documentation of custodian status is required.

37
Q

What are gift taxes based on?

A

It is paid by the donor and based on the gift’s value on the date it is given.

38
Q

Good faith deposit

A

Is required when the syndicate places a bid on a competitive offering. It is generally 1 to 2% of the par value of the bonds offered for sale.

If the bid is unsuccessful then it will be returned to the underwriting syndicate.

39
Q

Pre funded bond

A

Yield must be quoted to call

40
Q

Wrap Account

A

Are accounts for which firms provide a group of services, such as asset allocation, portfolio management, etc for one fee. Are generally investment advisory accounts.

41
Q

Stock ahead

A

GTC may not be executed even if the stock is trading in the desired range because limit orders have higher priority.

42
Q

MSRB rules are enforced by…

A

FINRA

43
Q

Crossover refunding

A

Is a method of advance refunding in which he revenue stream originally pledged to secure the refunded bonds continues to be used to pay debt service on those bonds until they mature or are called by the issuer.

44
Q

Collection Ratio

A

Shows the percentage of property taxes that are actually collected.

45
Q

Dollar-Cost Averaging

A

Is the process of buying and selling equity and debt securities to keep either a constant dollar or constant ratio between the two.

46
Q

A long coupon

A

A long coupon is an original coupon payment that is paid more than 6 months from the dated date.

47
Q

Blind pool

A

Is a type of oil and gas program in which at least 25% of the properties are not specified.

48
Q

Max sales load

A

8.5%

49
Q

Mini options

A

Only represents 10 shares of the underlying security and has a premium multiplier of $10.

50
Q

Covered call break even

A

The stock price less premium

51
Q

Max debit spread gain

A

Occurs if both sides are exercised

52
Q

Time value of an option

A

Premium minus the intrinsic value

53
Q

Corporate bonds are quoted as a percentage of par in….

A

Eights

54
Q

Corporate debt offerings of this amount or less are excluded from the Trust Indenture Act of 1939.

A

$50 million

55
Q

Can you contribute passive income to an IRA?

A

No. Only earned income.

56
Q

Sales charges are paid on

A

Open end investment companies

Mutual funds

57
Q

Commissions are paid on

A

Closed-end investment companies.

Think ETFS or stocks

58
Q

Securities issued outside the United States by US issuers and sold to non-US residents

A

Are considered to be offered in an exempt transaction.

59
Q

Code of Arbitration - simplified

A

Less than 50k

Statute of limitations 6 years

60
Q

PSA

A

Public securities administration

Uses historical data and projections of mortgage prepayments to estimate yield and maturity of different CMO tranches.

61
Q

LEAPS and taxation

A

The writer is always taxed short term

The buyer can be long term if held for more than 12 months.

62
Q

When is a new issue marginable?

A

30 days

63
Q

The government does not guarantee the payment of interest and principal for who?

A

Freddie Mac - FHLMC - which is a government sponsored entity.

Fannie Mae - FNMA

64
Q

Private Activity or Alternative Minimum tax bonds

A

If 10% or more of the bond proceeds will be used to finance a project that will be used by a private entity. Interest earned may be subject to alternative minimum tax.

Series 7 Study (3 decks)

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