Random 65 Flashcards
STRIPS - interest rate
zero coupon bonds
Government National Mortgage Association (GNMA) Bonds
-Direct backing of the US Treasury. the only security without the word Treasury in its name that is backed by the U.S. government is a GNMA.
-payments are received monthly, because underlying the security is a pool of home mortgages, which are paid for monthly. Second, each monthly payment the investor receives consists partly of interest and partly of principal.
-Subject to state taxes
Tenants in the Entirety
can be used by married couples only
of days mutual fund has to redeem an investors shares
7
Do Treasury bills pay interest?
They are zero coupon
Cost basis of a gift received
carryover basis and holding period
holding period of inheritence
always LT even if actually ST
convertible securities generally sell at a slight ____over their parity pric
premium
parity price of a convertible
common stock trading price * # shares bond can convert into
order of returns for a discount bond
D
N
C
YM
YC
No registered investment company can make IPO unless it has net worth of at least ___
$100k
Treasury notes are issued with maturity dates of
2–10 years.
Roth 401k vs IRA
Roth 401k:
Same 5 year rule as IRA
Employer contribution cannot be roth
HAVE RMDS
NO INCOME LIMIT
Excess Contribution penalty - IRA
6%
Any contribution in excess of the indexed maximum (and the earnings associated with the excess) is subject to a penalty of 6%.
ERISA Section 404(c) relieves the employer of ____ _____ for investment decisions made by employees.
fiduciary responsibility
Section 404(c) The safe harbor requirements relieve the trustee of a 401(k) plan of liability if the plan participants have the ability to select from at least _ different investments and are allowed to make selection changes no less frequently than ____.
3 different investments
no less than quarterly
funds in a Coverdell ESA must be used by the time the beneficiary is __
30
QDRO - is it applicable to IRAs?
No. Only Qualified Employer Plans
The fiduciary standards of ERISA
-require that plan participants be offered a broad range of investment options in order to obtain the benefit of broad diversification.
-Under no circumstance, even when benefiting plan participants, are fiduciaries permitted to engage in prohibited transactions such as lending money to the plan.
-The standards of prudence apply to the administration of the plan, as well as to the investment decisions, and the investment policy, although a good thing to have, is not required under ERISA.
Coverdell vs 529
-The Coverdell may only be used by persons who fall within certain income limits—no such limits apply to the 529 plan.
-The Coverdell has contribution limits set by federal law; each state sets its own 529 limit.
-If the money is not used for qualified education expenses, it is the donor in a 529 plan who is responsible for any taxes and penalties, but to the beneficiary in a Coverdell ESA.
It is the ____ _ shares that have no front-end load, but they do have a 1% CDSC for a period of one year.
Class C
Mutual fund pricing is based on the ____ _____ _____ The price is based on the next calculated NAV per share after the order is received.
forward pricing rule.
SEC Rule 144 covers
sale of restricted stock (e.g. sold via private placcement) and control stock
Rule 144 applies to the sale of unregistered securities owned by affiliates or nonaffiliates (private placements) AND the sale of control stock. It does NOT apply to the sale of REGISTERED securities by nonaffiliated persons.
Preemptive rights
give a shareholder the right to buy additional shares of a new issue in order to maintain the size of an ownership stake
___ _____bear no stated interest rate. They are sold at a discount through weekly auctions and are actively traded in the money market. Treasury ___ and Treasury _____ both carry stated interest rates.
Treasury bills: No interest rate
Notes and bonds: have an interest rate
A specialized or sector fund invests __ or more of its assets in a particular region or industry.
25%
The Investment Company Act of 1940 requires that an open-end investment company have a minimum of $____in net assets prior to commencing a public offering. Reports must be sent to shareholders on a ______ basis. No fund is permitted to own more than __ of the outstanding shares of another registered investment company.
$100,000 minimum
reports on a semiannual basis
3%
Most loans from a 401(k) plan are required to be repaid within __ years. This rule does not apply to loans taken for a home purchase.
5
must be repaid with interest
must be secured and made in accordance with plan provisions
For RMD purposes, each IRA is figured separately and the distribution can be made from one or all of them. That is/is not the case with a 401(k) plan. Each account has an RMD that can only be paid from that account.
IS NOT the case. RMDs from 401ks must be taken from the actual account
qualified pension plans must
They must not discriminate.
They must have a vesting schedule.
They must be in writing.
An employer must update the status of all employees at least annually
A governmental Section 457 plan must be __—that is, it must hold plan assets in trusts or custodial accounts for the benefit of individual participants. Conversely, a tax-exempt (nongovernmental) Section 457 plan may ____
governmental: funded
tax exempt/nongovernmental: may not be funded
Defensive industries are least/most affected by normal business cycles. Companies in defensive industries generally produce nondurable consumer goods, such as food, pharmaceuticals, tobacco, and energy
least
During recessions and bear markets, stocks in ____ industries generally decline less than stocks in other industries.
defensive
Defensive industries are least/most affected by normal business cycles. Companies in defensive industries generally produce nondurable consumer goods, such as food, pharmaceuticals, tobacco, and energy
To be considered a negotiable CD, a CD must have a face value of at least
$100k
GNMAs are subject to what taxes (fed/state/local?)
federal, state, and local income tax
note the difference from treasury which are just federal
The maximum amount of bitcoin that will ever be in circulation is ___
21 million coins
It is only in the case of ___contracts that the buyer (and seller) are both obligated to complete the contract.
forward
Standardized equity options are issued and guaranteed by the ___. They are traded on the ___and other exchanges.
OCC: options clearing corporation
CBOE: chicago board options exchange
One question asked on a new ___ account form that is not required on a normal brokerage account opening is: investment experience and knowledge
options
A ____ ____ is an informal trust that is set up as a bank account.
Totten trust
The person who sets up the Totten account is the trustee of the account and can name any person as the beneficiary of the account. Upon the death of the trustee, the money will immediately be made available to the named beneficiary.
can closed end funds have fractional shares?
No. full shares only
Mutual funds (open end) may have fractional
what is required for qual plans: SPD (summary plan description) and/or IPS (investment policy statement)?
The DOL requires a SPD to be given to a participant
the IPS is not required under any rules. This is what the investment advisors of the plan will follow
All prospective options customers must receive a copy of the ___ at or before the time the account is approved to trade options.
ODD (Options Disclosure Document)
It is the options account agreement that must be signed and returned to the broker-dealer within 15 days of account approval.
____ ____ _____ must be signed and returned to the broker-dealer within 15 days of account approval. (options accounts)
options account agreement
ERISA Section 404 (c) describes a safe harbor for 401(k) plan fiduciaries. Among the requirements is to provide at least 3 different investment alternatives with a range of risk and provide account access no less frequently than ____.
quarterly
Preferred stockholders do/do not have the right to subscribe to a rights offering.
preferred stockholders do not have preemptive rights
the term no-load cannot be used if 12-b1 charge exceeds
0.25%.
Dying intestate means that there is no valid will. In that case, the state will appoint someone as ______ of the estate with the responsibility of handling all of the affairs of the deceased. Only when there is a will is there an _______,
court will appoint an administrator
only with will is there an executor
JTWROS accounts - While either party may enter an order, any money or securities delivered out of the account must be in the names of ____
both owners.
Money purchase pension plan - annual contributions are
mandatory
The property that may be transferred into an UGMA account is generally limited to _____while in an UTMA account, almost any kind of property—real or personal, tangible or intangible—can be transferred to the custodian.
cash and securities
The 4 primary requirements of the CIP are
name, physical address, DOB, and SSN. - “NABS” (name address birthday ssn)
Estate taxes must be paid within ___months of death
nine
