Series 6 Flashcards
All of the following are tools of technical analysis except: chart formation, advanced decline lines, moving averages, Dividend yields
Dividend yields
Options are available on all of the following investments except: The S & P 500 index, foreign currency, mutual funds, individual stocks
Mutual funds
A client puts $1000 a month into a variable annuity. The client is considering decreasing their monthly investments to a quarterly basis. The client has $275,000 in the annuity and wants to start withdrawing the money upon retirement. What is the term used to describe the current holdings?
Accumulation units
An open-end investment company that invest primarily in the securities of companies in a specific geographic area is called:
Regional fund
All the following are components used in the capital asset pricing model calculation except: opportunity cost, expected price, risk free rate, beta
Opportunity cost
True or false: letters to a specific individual are considered correspondence and may be subject to spot checks prior to mailing
True
When measuring the volatility of a large cap stock, what is beta likely being compared to?
The standard and poors 500 index
Is depreciation included into the cost of goods sold?
No
Securities inherited have a basis equal to the value of the shares at the time of ..
Decadents death
What defines an investment company ?
The investment company act of 1940
What firm document must address the firms procedures for supervising correspondence , internal communication, and customer complaints?
Written supervisory procedures
All of the following are found in an income statement except: net income before taxes, gross sales, liabilities, cost of goods sold
Liabilities
When given NAV and SC% how do you calculate POP?
POP= NAV divided by (100%-SC%)
Tax equivalent yield formula
Interest on municipal bond divided by (100%-tax bracket%)
A public school principal has contributed 300k to to a 403b plan on a pre tax basis. The account is currently worth 500k. What will be the tax treatment if any distributions taken from the account upon retirement?
The account has a zero cost basis and all distributions will be treated as ordinary income
All of the following are Exempt from FINRAS 5% markup policy except: Mutual fund sales charge, underwriting spreads charged on IPOs, commissions charged on OTC transactions, markups charged on principal transactions of municipal bonds
Commissions charged on OTC transactions
To calculate pop when given NAV and sales charge what is the formula?
NAV /(100% minus sales charge%)
Which of the following is a nonexempt security under the 1933 act? NYC municipal bond, XYZ mutual fund, ABC church bond, T note
XYZ mutual fund
Under the investment company act of 1940 which of the following would not be considered a management company? Closed end fund, non-Diversified mutual fund company, unit investment trust, open end fund
Unit investment trust
If a 60 year old investors investment objective is retirement income what should they consider investing in is the largest portion of their portfolio?
High-grade corporate bond
True or false: minimum distributions are required in a Roth IRA
False
An Investor gifts a stock to their child. The investors original cost basis is $10 per share. On the date of the gift the market value of the stock is $15 per share. What is the child cost basis,?
$10. The recipients cost basis will either be the donors original cost basis or the market value on the given date which ever is less
An investor wishes to redeem 1000 shares of a mutual fund. The pop is $15 per share, the funds sales charge is 6%, and the fund charges a 1% redemption fee. What amount will the investor receive when will they make their 1000 shares directly through the fund?
$13,959. Pop minus sc percentage equals net asset value. ( redemption price) 15-6%(.90)= 14.10. 14.10x1000=14,100. 14100-1%(141)= $13959
If a customer purchases mutual fund shares and then redeem those shares within seven business days after the date of transaction the dealer must do what?
The dealer must refund the full concession to the underwriter that was paid to the dealer on the original sale.
A client cost basis is equal to their:
Non deductible contributions or deductible contributions?
Non deductible contributions
Return of capital represents:
Pre-taxed or already taxed
Already taxed
Which of the following is not a money market instrument? Negotiable cd, commercial paper, T bill with six weeks until maturity, US savings bond with four weeks until maturity
US savings bond with four weeks until maturity. They are illiquid because they must be redeemed by the US government
Variable life insurance contracts typically allow the owner to borrow a portion of the contracts cash value. What is the percentage available once the contract has been in force for a minimum time period ( typically 3 years)
75%
What type of fund often offers check writing privileges?
Money market funds.
In regards to the cash value on a variable life insurance who assumes the risk? The policyholder or the insurer
The policyholder
Periodic premium annuities are funded with payments that are made by either of these two methods:
Fixed, flexible
An investor who owns a thinly traded stock in the secondary market has exposed their portfolio to:
Liquidity risk.
Nonsystematic risk is another term for what risk?
Individual security selection risk.
In measuring the volatility of a large cap stock what is better likely being compared to?
The Standard & Poor’s 500 index
mutual fund redemption fees are paid to who?
The fund
Which of the following is permitted to invest in an LGIP?
Government or school district
ABC income fund currently shows to NAV and Pop at $18. The fund is most likely a:
No load fund
All of the following are direct expenses of an open and investment company except: transfer agent fees, advisory fees, accounting expenses, sales charges
Sales charges are not direct charges to the fund
All of the following are components used in the capital asset pricing model calculation except: risk-free rate, beta, expected price, opportunity cost
Opportunity cost
Duration is a measurement of a bonds:
Price sensitivity
All of the following must be contained in a brokerage account statement except: taxes due, account value, description of securities held in the account, realized and unrealized gains
Taxes due
Technical analysis measures:
The market risk involved when investing in a particular security: Analyze the value of securities by studying historical prices price movement and trading volume involves various charts
Fundamental analysis measures:
The financial strength of a corporation and the business risk of investing in a particular security
True or false: regarding a variable life policy death benefit, the proceeds from the death benefits are income tax free to the beneficiary
True
True or false: regarding a variable life policy death benefit, there is a guaranteed minimum
True
All of the following items will be found in the prospectus of ABC’s small-cap fund except: A fee table, principal risk, performance information, credit rating
Credit rating
Typically what bond would have the highest interest rate risk as determined by duration
A zero coupon bond with 30 year maturity
An investor who purchases 1000 shares of a mutual fund with a pop of $11.25 and a sales charge of 7% will pay sales charge of,:
$787.50
Pop x sc% = sales charge $ 11.25X.07=.7875
.7875x1000=787.50
True or false a limited partner has limited liability
True
True or false: a corporation has limited liability
False
True or false: a corporation has unlimited liability
True
True or false: a general partner has unlimited liability
True
True or false: interval funds trade in the secondary market
False
True or false interval funds are registered closed end management investment companies
True
True or false: interval fund shares are not redeemed daily
True
Why do technical analysis chart price data and volume over time?
Because it begins to form patterns and identifies trends
Prior to death, A client purchased 1000 shares of ABC closed and growth fund at $21 per share. On the date of death the fund had a market price of $26.75 and a NAV of $28.89. The shares were left to the clients sister. What is the cost basis of the shares?
$26.75. The basis of securities received from an estate is generally the fair market value as the date of the decadents death.
How does a 1035 exchange transaction help a client?
It allows a policyholder to exchange an old policy for a new one without facing current income taxation
What is the amount an investor expect to receive above the risk free rate?
The risk premium
Prior to death a client purchased 1000 shares of ABC closed end growth fund at $21 per share. On the date of death the fund had a market price of $26.75 and a NAV of $28.89. The shares were left to the clients sister. What is the cost basis of the chairs?
$26.75. The basis of securities received from an estate is generally the fair market value as the date of the decadence death.
How does a 1035 exchange transaction help a client?
And allows a policyholder to exchange an old policy for a new one without facing current income taxation
An investor paid the market price plus a commission for management company shares. What type of shares did they purchase?
Closed end management company shares
A Client invested 15,000 into XYZ corporate bond fund. This client has $400 of dividends reinvested and $1100 capital gains reinvested into the fund. Three years after the initial investment the client exchanges the XYZ corporate bond fund for XYZ government bond fund. At the time of the exchange the value of XYZ corporate bond fund was 20,000. What will be the tax consequence of the exchange?
The client will have a capital gain liability of $3500 and the new shares will have a cost basis of 20,000
(investor has a starting cost basis of 15,000+ the reinvested dividends and gains of 1500 brings the adjust a cost basis up to 16,500. When the exchange is completed the shares have a current value of 20,000. To calculate the tax liability subtract the adjusted cost basis from the current value at the time of the exchange. (20000-16500=3500) The client will have a capital gain of 3500 and the new shares will have a cost basis of $20,000
What is the maximum sales charge of an open end fund
8 1/2 percent
Broker-dealers must send account statements to customers at a minimum how often
Quarterly
The PDQ fund has a front and sales charge of 3% and 12 B1 fee of .5%. The fund has a management fee of 1% per year and charges an administrative fee of .23%. What is the expense ratio of this fund?
1.73% add all charges except sales charge
How often must the Board of Directors for a mutual fund review the expenses paid under a 12 B1 plan?
Quarterly. It is reviewed quarterly and approved annually by a majority of the board including disinterested members
How many days does a firm have to provide a retail customer form at CRS upon request?
30 days
What contains the trade date, identity of security traded, price of which trade was executed, and I’m out of commission or mark up mark down?
Confirmation. Order ticket has a lot of the same but would not include them out of commission or markup
A few years following the purchase of common stock fund for $1000 to fund sold for $1500. Dividends totaling $125 have been reinvested. What is the cost basis?
$1125. I need distribution is reinvest it back into the fund it becomes part of the cost basis
The model used in the modern portfolio theory attempts to find the required rate of return for a specific asset:
CAPM (capital asset pricing model)
What amount of initial capitalization is required of a mutual fund?
$100,000
