Series 6 Terminology

Question 1

Capital

Answer 1

Accumulated money or good that are available for producing more money or goods.

Question 2

Liquidity

Answer 2

The ease with which an asset can be converted to cash in the marketplace.

Question 3

Cap

Answer 3

A measure of a stock’s market capitalization.

• Large market = $10 Billion +
• Mid market = $2 - $10 Billion
• Small market = 300 Million - $ 2 Billion (volatile)

Question 4

Money Market

Answer 4

Open-ended mutual fund that invests in short-term debt securities.
The NAV is set at $1 per share.   
- Certificates of deposit (CDs)
- Commercial paper
- U.S. Treasuries
- Bankers' acceptances
- Repurchase agreements

Question 5

Income Funds

Answer 5

Mutual funds, ETFs or any other type of fund that seek to generate an income stream for shareholders by investing in securities that offer dividends or interest payments. The funds can hold bonds, preferred stock, common stock or even real estate investment trusts (REITs).

Question 6

ETF

Answer 6

Exchange Traded Fund

Question 7

Municipal Bond

Answer 7

A debt security issued by a state, municipality or county to finance its capital expenditures.

• Construction of highways, bridges or schools.
• They are exempt from federal taxes and from most state and local taxes, making them especially attractive to people in high income tax brackets.

Question 8

General Obligation Bond - GO

Answer 8

A municipal bond backed by the credit and taxing power of the issuing jurisdiction rather than the revenue from a given project.

GO Bonds are issued with the belief that a municipality will be able to repay its debt obligation through taxation or revenue from projects. No assets are used as collateral.

Question 9

Treasury Bonds

Answer 9

A bond issued by the US Treasury.

• Fixed-interest
• Make interest payments semi-annually, and the income received is only taxed at the federal level.

Question 10

Investor Objective:

Preservation of capital and safety

Answer 10

Recommendation:

Government securities or Ginnie Maes

Question 11

Investor Objective:

Growth

Answer 11

Recommendation:

Common stock or common stock mutual funds

Question 12

Investor Objective:

Balanced or moderate growth

Answer 12

Recommendation:
Blue Chip (Large cap) stocks

Question 13

Investor Objective:

Aggressive growth/speculation

Answer 13

Recommendation:

Technology stocks or sector funds

Question 14

Investor Objective:

Income

Answer 14

Recommendation:

Bonds - but not Zero coupons

Question 15

Investor Objective:

Tax-free income

Answer 15

Recommendation:

Municipal bonds or municipal bonds funds

Question 16

Investor Objective:

High-yield income

Answer 16

Recommendation:

Corporate bonds or corporate bond funds

Question 17

Investor Objective:

Equity income

Answer 17

Recommendation:

Preferred stock and utility stocks

Question 18

Investor Objective:

Liquidity

Answer 18

Recommendation:

Money market funds

Question 19

Investor Objective:

Keep pace with inflation

Answer 19

Recommendation:

Stock portfolio

Question 20

Investor Objective:

Answer 20

Recommendation:

Question 21

What factors are included in calculating a Mutual Funds Expense Ratio?

Answer 21

• BOD Stipend
• Investment Advisor Fee
• Custodian Fee
• 12b-1 Fee
• Transfer Agent Fee
• Legal and accounting fees
  Note: This does not include the Sales Load.

Question 22

What is the largest part of a mutual funds expense ratio?

Answer 22

The Investment Advisory Fee

Question 23

What are the 2 types of Annuities

Answer 23

Variable and Life

Question 24

What is an Annuity

Answer 24

An Annuitant makes periodic payments to the insurance company which invest the money tax deferred.
At retirement, the money becomes available for withdrawal.
Lump sum or periodic monthly payments for life.

Question 25

What is NAV

Answer 25

Net Asset Value

Which is the Mutual Funds share value.

Question 26

How do you calculate the NAV

Answer 26

Assets - liabilities / outstanding shares

Question 27

What is the 12b-1 fee

Answer 27

These are asset based fees used to cover the costs of marketing and distributing funds to investors. (This is not a sales fee).

Question 28

Margin

Answer 28

Money borrowed from a bank through a brokerage to purchase securities

Question 29

Short Selling

Answer 29

Selling shares that are not owned.

Question 30

Who are the parties in a Mutual Fund

Answer 30

• BOD Stipend
• Custodian
• Transfer Agent
• Investment Advisor
• UW

Question 31

Mutual Fund: All the parties are paid from income from the fund except who?

Answer 31

The UW which is paid from Sales charges

Question 32

Define POP

Answer 32

The Purchase of Price

The purchase price of a fund share

Question 33

What is a load and name the types

Answer 33

The Sales charge.

• Front end
• Back end
• No load

Question 34

What is sold at a discount and mature in 4, 13, 26, or 52 weeks and does not make interim interest payments.

Answer 34

Treasury Bills (T Bills)

Question 35

A customer purchases $50,000 worth of 10% corporate bonds at par. At the end of the day, the bonds close down a half point. The customer has a loss of:

Answer 35

The customer holds 50, $1,000 bonds. One bond point equals $10. Therefore, if each bond decreases by a half-point, the loss is $5 per bond; multiplied by 50 bonds, this equals $250.

Question 36

A customer bought a bond that yields 6.5% with a 5% coupon. If the bond matures at this point, the customer will receive

Answer 36

Upon redemption of a bond, whatever current interest rates may be, the investor receives par ($1,000) plus the final semiannual interest payment ($25 in this case), for a total of $1,025.

Question 37

Which instrument is allows financial institution-sponsored mortgage pools and are not backed by the US government?

Answer 37

Collateralized Mortgage Obligations (CMOs)