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Wills Series 65 > Series 65 Terms & Definitions > Flashcards

Series 65 Terms & Definitions Flashcards

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Series 65 flashcards
1
Q

Form 13F

A

Investment managers with discretion over portfolios with $100MM AUM+ must file quarterly

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2
Q

Form U-2

A

Uniform Consent to Service of Process (state)

This is a statement of eligibility for the filing of a security

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3
Q

Bankers’ Acceptances

A

Short-Term notes that facilitate import/export activity

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4
Q

EDGAR stands for..

A

Electronic Data Gathering Analytics and Retrieval system

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5
Q

A Cash account is what type of account?

A

“Type 1” Acct

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6
Q

Broker / Dealers mark up and mark down when acting in a…

A

PRINCIPAL capacity

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7
Q

A BUY-STOP is often used to protect a _____ position?

A

Short Position

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8
Q

Money Market Instruments are made up of…

A

Repurchase Agreements (Repos)
Commerical Paper
Bankers’ Acceptances
Negotiable or Jumbo CDs

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9
Q

Limit Orders trade at a given price or…

A

Better

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10
Q

European Options can only be executed when?

A

On the last business day prior to the expiration date

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11
Q

Stock warrants are ______ term

A

Stock Warrants are LONG term

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12
Q

Stock Rights and Options are _________ term

A

Stock Rights and Stock Options are both SHORT term

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13
Q

In order to generate income one would…

A

SELL COVERED CALLS (premium received)

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14
Q

Futures trade via…

A

EXCHANGES

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15
Q

Are Futures margined or not?

A

Yes, FUTURES are MARGINED

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16
Q

Forward contracts trade how?

A

OVER THE COUNTER (OTC)

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17
Q

Are Forward contracts margined?

A

NO, FORWARD contracts are NOT MARGINED

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18
Q

What series license does one need to trade either Futures or Forward contracts?

A

Series 3

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19
Q

ETFs trade in what type of market?

A

The secondary market

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20
Q

Which series license does one need to trade ETFs?

A

A series 7 is required to trade ETFs

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21
Q

Can ETFs be sold short?

A

Yes

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22
Q

Can ETFs be purchased in a margin account?

A

Yes

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23
Q

Exchange Traded Notes (ETNs) trade on the exchange at ___, ___, & ____ maturities?

A

ETNs: 10yr, 30 yr, 40 yr maturities

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24
Q

Annuity Withdrawals are always taken how?

A

LIFO

Earnings always come out FIRST and are 100% taxable as ordinary income

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25
Q

Stockholders’ Equity Consists of what THREE elements?

A

Stock
Capital Surplus
Retained Earnings

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26
Q

Stockholders’ Equity is also known as _____ or _____ ?

A

Net Worth or Book Value

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27
Q

Current Ratio is used to measure what?

A

A Company’s SHORT-TERM Financial Health

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28
Q

The best example of an open-ended fund is what?

A

Mutual Funds

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29
Q

What is the main advantage of an open-end mutual fund?

A

Diversification

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30
Q

What is the max 12b-1 fee for mutual funds?

A

0.25%

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31
Q

Define “Net Redemption”

A

When more shares of a mutual fund are being redeemed than purchased.

  • Causes the fund’s overall NAV to decrease
  • *Shareholders’ NAV per share remains unchanged
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32
Q

SEC Regulation A allows what?

A

It allows issuers to sell relatively small issues of securities to the public by filing a SHORTER, SIMPLIFIED REG STATEMENT

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33
Q

Under the USA a private placement of NEW securities is considered to be an ______ transaction as long as no more than ___ offers during a ____ months period and where NO COMMISSIONS ARE PAID?

A

Exempt
10 people
12 months

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34
Q

Under the USA, NON-ISSUER transactions are considered _____?

A

Non-Issuer transactions are EXEMPT

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35
Q

“SALES” Do NOT include ______ pledges or _______ using stock as collateral?

A

Bona Fide Pledges

Loans

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36
Q

Under USA, securities issues by Foreign Companies are considered ______?

A

FOREIGN CO’S SECURITIES –> NOT EXEMPT

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37
Q

403-B Tax-Sheltered annuity contributions are made with Post or Pre-Tax dollars?

A

403-B contributions are always made with PRE-Tax dollars

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38
Q

TSTRIPS are what type of securities?

A

T-Strips = Zero-Coupon securities (meaning they do not pay interest)

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39
Q

Do zero-coupon securities pay interest?

A

NO

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40
Q

Current Yield equation is…?

A

The percentage rate (ex 5% T-Note) DIVIDED by present Market Price.
%/MP

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41
Q

The credit balance of a Margin account consists of:

A

Proceeds of a Short Sale PLUS the Reg T Deposit

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42
Q

Exempt Securities are exempt from what THREE elements?

A

Exempt Securities are EXEMPT from:
State Registration
Advertising & Sales Literature Filing requirements

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43
Q

Under NASAA regarding custody and 3rd parties, checks must be forwarded within ____?

A

24 hours

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44
Q

Define “House Call”

A

“House Call” is when a Brokerage Firm makes a margin call in an amount that exceeds FINRA’s min maintenance requirements.

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45
Q

Under the USA, Individuals must register as an Agent when….

A

selling LPs (LIMITED PARTNERSHIPS) on behalf of an ISSUER

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46
Q

ERISA limits of pension fund assets which may be invested in the securities of the employer to ____ %

A

10%

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47
Q

Define “Consolidating”

A

It means that the market is moving sideways

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48
Q

Short-Term Capital Gains and Dividends are taxed as what?

A

Ordinary Income

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49
Q

When one buys an Open-End mutual fund share, you pay the _____ ?

A

ASK

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50
Q

When one sells an Open-End mutual fund share, you receive the ____?

A

NAV

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51
Q

Buying a Call is ____?

A

BULLISH

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52
Q

Selling a Put is _____?

A

BULLISH

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53
Q

Shorting (selling) a Call is ___?

A

BEARISH

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54
Q

Long a Put is _____?

A

BEARISH

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55
Q

Investors can write a max of ______ annually in capital loses?

A

$3,000

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56
Q

On Gifts made prior to death, who assumes the cost basis and is responsible for any potential capital gains taxes?

A

The RECIPIENT

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57
Q

Internal Rate of Return is defined as…?

A

The RATE at which NET INFLOWS = NET OUTFLOWS

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58
Q

The SHARPE Ratio measures

A

Risk VS Reward

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59
Q

Define “Assessable Stock”

A

It is stock that was ISSUED BELOW PAR for which the issuer has the right to ASSESS to SHAREHOLDERS for the UNPAID PAR VALUE
(most stock is unassessable)

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60
Q

If an IAR is terminated, who has to notify the administrator?

A

Only the Investment Advisory Firm

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61
Q

Define the “Blue Chip” exemption

A

Exchange-Listed stock qualifies as exempt because of it

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62
Q

Are Banks and Bank Holding Companies defined as “Investment Advisors”?

A

NO

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63
Q

Holding Period Return is…?

A

It’s the TOTAL RETURN on an investment over a period of time (usually shown as a %)

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64
Q

NASDAQ-listed securities are not considered exempt unless they are listed on….

A

the NASDAQ NMS (National Market System)

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65
Q

An Investment Advisor is required to register is all of his customers are _____ but not if all of his customers are ____?

A

Banks

Insurance Companies

66
Q

Examples of Cyclical stocks include…?

A

Autos
Airlines
Hotels
Restaurants

67
Q

Examples of Counter-Cyclical stocks include…?

A

Utilities
Groceries
Gas

68
Q

4 Phases of Market Condition:

A

Expansion (Recovery)
Peak
Contraction (Recession)
Trough

69
Q

Who sets Monetary Policy?

A

Federal Reserve Board

70
Q

How does the Fed Reserve Board effect Monetary Policy?

A

By changing interest rates and increasing/decreasing the money supply by Buying or Selling securities

71
Q

Define the Federal Funds rate

A

The interest rate that member banks charge each other for loans overnight

72
Q

A change in tax law is an example of _____ policy?

A

Fiscal

73
Q

Define LIBOR

A

London Interbank Offered Rate.

It is the rate that International Banks dealing in EURODOLLARS charge each other for Large Loans

74
Q

What is FOREX?

A

A 24 hr OTC Marketplace where CURRENCIES trade in PAIRS. Not open weekends or holidays

75
Q

Define “Prime Rate”

A

A rate used by Banks for their BEST Commercial customers.

*Prime interest rate is not a factor in calculating total return

76
Q

Define “Credit Spread”

A

It’s the difference between the returns on two bonds with the same maturity date but differing credit ratings.
*Typically US govt security vs corp bond. The difference shows the additional cost incurred by a corporation when borrowing money. A “tight” credit spread is good for businesses but it’s challenging for an investor looking for income.

77
Q

Define GDP

A

Value of ALL Goods and Services produced by Labor AND Property located WITHIN a Country’s borders.
*Base upon geographic location, NOT ownership

78
Q

Define M1

A

Includes: ALL Physical Currency (dollars and coins) as well as Demand Deposits (Checking accounts and Negotiable Order of Withdrawal (NOW) accounts)
Very Liquid.

79
Q

Define M2

A

Include M1 + Time-Related Deposits, Savings Deposits, and Non-Institutional Money-Market Funds,
*Also Known As “Money Supply”

80
Q

Define “Balance of Payments Accounts”

A

It’s an accounting of a country’s international transactions for a certain period of time.

81
Q

Define “Balance of Trade Accounts”

A

This consists of all raw materials and manufactures goods bought, sold, or given away.
*It also includes services

82
Q

Define what “Footnotes” are and where they are found.

A

They are found on a balance sheet.
They are items added to a Corporate Balance Sheet for clarification.
They are important b/c they may show UNDISCLOSED DEBT

83
Q

Where are Revenue and Dividends found?

A

On the INCOME STATEMENT

84
Q

What does the Income Statement list?

A

Revenue
Depreciation
Net Income

85
Q

What does the Cash Flow Statement do?

A

It measures NET INCOME + CHARGES that do not require CURRENT expenditures such as AMORTIZATION, DEPLETION, and DEPRECIATION

86
Q

Define Regulation T

A

Requires 50% of purchase price to be held in margin account.

Set by the Federal Reserve Board

87
Q

Record Keeping for B/Ds and IAs?

A

BDs: 3 years
IAs: 5 years

88
Q

If Registration for an Investment Advisor is terminated, the IA must maintain a surety bond for how many years?

A

3 years

89
Q

What Are the THREE types of Investment Companies?

A
  1. ) FACE Amount Certificates (Sold at a discount)*No longer exist
  2. ) Unit Investment Trusts (Pooled investments, unmanaged)
  3. ) Management companies
90
Q

Define Guaranteed Security

A

Payment of Principal, Interest, and Dividends are guaranteed by a backing party. (Ex. Gov’t, Insurance Companies, Parent Companies)

91
Q

Most IPOs Register via…?

A

COORDINATION.

Requires 3 copies of prospectus, articles of incorporation, and copy of indentures

92
Q

Civil Liabilities timelines for action

A

Action must be taken within 3 years of the violation or 2 years from discovery of the violation, WHICHEVER COMES FIRST

93
Q

Define “Stagflation”

A

A Stagnate economy with inflation; The Economy is Slowing while Prices are Increasing

94
Q

Recession is defined as

A

2 Quarters of GDP decline (6 months)

95
Q

Depression is defined as

A

8 Quarters of GDP decline (24 months)

96
Q

Examples of Leading Indicators

A

Machine Tool Orders
Building Permits
Housing Starts
S&P 500

97
Q

Examples of COINCIDENT Indicators

A

Personal Income
Index of Industrial Production
Manufacturing & Trade Sales
S&P 500

98
Q

Example of Lagging Indicators

A

Employment
Corporate Profits
Business Inventories

99
Q

Fiscal Policy is set by whom?

A

President and Congress.

100
Q

What are the Primary Tools of Fiscal Policy?

A

Federal Taxation and spending.

Raise Taxes to slow economy, lower taxes to stimulate the economy

101
Q

Keynsian Theory

A

Government Control; Keynes advocated for increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the depression.

Subsequently, Keynesian economics was used to refer to the concept that optimal economic performance could be achieved—and economic slumps prevented—by influencing aggregate demand through activist stabilization and economic intervention policies by the government. Keynesian economics is considered a “demand-side” theory that focuses on changes in the economy over the short run.

102
Q

Supply Side Economics

A

No Govt Meddling, Business will take care of itself

103
Q

Federal Reserve System has how many member banks across the US?

A

13

104
Q

Discount Rate

A

The Amount The Fed Reserve charges Member Banks which then charge other retail banks

105
Q

Federal Open Market Committee

A

Fed buys and sells Govt securities to increase, decrease the amount of money in the economy

106
Q

Credit Spreads typically _____ when a Recession is expected and ______ when a Recovery is expected?

A

Widen.

Narrow

107
Q

What is a Credit Spread?

A

It’s the difference in Interest Rates between US Treasury Bonds and AAA Corporate Bonds

108
Q

Current Ratio Formula

A

Current Assets / Current Liabilities

109
Q

Acid Test (AKA Quick Ratio) Formula

A

Current Assets - Inventory / Current Liabilities

*Most STRINGENT Measurement of LIQUIDITY

110
Q

Debt to Equity Ratio

A

Measures How Risky the business’s Capital Structure is.
Total Liabilities / Stockholders’ Equity
* The higher the ratio indicates the higher the debt

111
Q

Earnings Per Share

A

Measures portion of stock issuer’s earnings that is available to common stakeholders.
Net Income - Preferred Dividend / Common Shares outstanding

112
Q

Price Earning Ratio

A

Compares stock’s Current Market Price relative to its earnings per share.
Market Price / EPS
* Used to determine whether or not the stock is fairly priced in the market relative to other issuers in the same industry.

113
Q

Dividend Payout Ratio

A

DIVIDENDS PAID / NET INCOME
Measures the generosity of the issuer’s Board Of Directors.
* This shows an investor how much of the earnings were retained by the issuer

114
Q

Limit Order

A
  • 2nd most common type of order

- orders to trade a security at a given price or better

115
Q

Stop Order

A

Orders to trade a security if a given trigger price is struck

116
Q

Open Buy Stop

A

Used to protect a long position’s downside risk or when stock is put into inventory ar a price lower than the current market price

117
Q

Buy Limit

A

Can be entered so that the investor will buy at the desired price

118
Q

Buys/Sells location in relation to current market price:

1.) _________
2.) _________
3.) ________________
________________________________________________
_________________Current Market Price_______________
4.) __________ 5.) ________________
6.) ________________

A
  1. ) Buy Stop
  2. ) Buy Stop Limit
  3. ) Sell Limit
  4. ) Buy Limit
  5. ) Sell Stop
  6. ) Sell Stop Limit
119
Q

Short Sale

A

Occurs when an investor sells shares he doesn’t own but has borrowed

120
Q

Marginable

A

Yes to:

  1. ) Exchange listed stocks and bonds
  2. ) OTC issues approved by the FRB
  3. ) Warrants

NO to:

  1. ) Put and call options
  2. ) Rights
  3. ) OTC issues NOT approved by the FRB
  4. ) Insurance contracts
121
Q

Type 1 vs Type 2 accounts

A

Type 1 are cash accounts

Type 2 are Margin accounts

122
Q

First Market

A

Trading of securities listed on the exchange (NYSE)

123
Q

Second Market

A

Trading unlisted securities over the counter OTC

124
Q

Third Market

A

Listed Securities OTC

125
Q

Fourth Market

A

LARGE BLOCKS between INSTITUTIONAL investors via ECN

126
Q

CBOE

A

Chicago Board Options Exchange

127
Q

DMM

A
  • Designated Marker Maker
  • One for each security on NASDAQ (not NYSE)
  • The NASDAQ version of a specialist on the NYSE
128
Q

Markups/Markdowns occur when?

A

When a B/D is acting as a DEALER

129
Q

Commissions occur when?

A

When a B/D is acting as a Broker or Agent

ABC –> Agent, Broker, Commission

130
Q

NOW Accounts

A

Negotiable Orders of Withdrawal

131
Q

Money Market Instruments

A
  • T-Bills, T-Notes, T-Bonds (< 1yr)
  • Bankers Acceptances
  • Commercial Paper (Blue Chip companies, sold at a discount, matures at face value) *P1, P2, P3 (P3 lowest)
  • Repurchase agreements (Repos)
132
Q

Demand Deposits (Types)

A
  • Checking accounts
  • NOW accounts
  • Money Market accounts
  • Some savings accounts
133
Q

M1 Money Supply

A
  • Cash

- Demand Deposits

134
Q

M2 Money Supply

A
  • Cash
  • Demand Deposits
  • CDs
135
Q

U.S. Gov’t Fixed Income Securities (types)

A
  • T-Bonds, T-Notes, & T-Bills
  • TIPs (Treasury Inflation-Protected Securities)
  • STRIPS
  • Non-Marketable Savings Bonds (ex. E.E. Bonds)
136
Q

Agency Fixed Income Securities (types)

A
  • Ginnie Mae
  • Fannie Mae
  • Freddie Mac (FHLMC)
  • Fed Home Loan Bank (FHLB)
  • Sallie Mae
137
Q

General Obligation (GO) Bonds

A
  • Type of municipal bond

- Backed by State and it’s ability to tax

138
Q

Types of Secured Corporate Bonds

A
  • Mortgage (ex. Factory)
  • Collateral Trust (owning shares of other companies’ stock in trust)
  • Equipment trust
139
Q

Types of UNsecured Corporate Bonds

A
  • Debentures (nothing backing it)

- Subordinated debt

140
Q

Asset-Backed Securities

A
  • Mortgages
  • Auto loans
  • Credit cards
  • Leases (oil leases)
  • Royalties
141
Q

T-Bills (maturities)

A

UP TO ONE YEAR (MAX)

  • 4 Weeks
  • 13 Weeks
  • 26 Weeks
  • 52 Weeks
142
Q

T-Notes (maturities)

A

2 YRS to 10 YRS

  • 2 yr
  • 3 yr
  • 5 yr
  • 10 yr
143
Q

T-Bonds (maturities)

A

10 Years +

  • 10 yrs
  • 15 yrs
  • 20 yrs
  • 25 yrs
  • 30 yrs
144
Q

Treasury Bills

A
  • aka “O.I.D.”s (Original Issue Discount instruments)
  • Issued in $1,000 increments
  • NO stated interest; DO NOT pay semi-annual interest
  • Matures at Par value
  • Bought at a DISCOUNT from par
  • Sold through AUCTIONS
145
Q

Treasury Notes

A
  • INTEREST-BEARING
  • Stated Interest Rate
  • Interest Paid SEMI-ANNUALLY
  • Issued in $1,000 denominations
  • Maturities: 2 yr, 3 yr, 5 yr, 10 yr
  • Quoted in points as % of Par value
  • **- 1/32 Increments, represented with a period
    ex. 97.16 = $970 + $5.00 (16/32) =$975
146
Q

Treasury Bonds

A
  • INTEREST-BEARING
  • Stated Interest (coupon) Rates
  • Paid Fixed Interest Rate SEMI-ANNUALLY
  • Issued In BOOK-ENTRY form (electronic)
  • $1,000 Dollars per Bond
  • Maturities: 10 yrs +
  • Quoted in points as a % of Par value
  • 1/32 Increments
  • Represented with a period
    ex. 102.20 = $1,020 + $6.25 (20/32) = $1,026.25
147
Q

TIPS

A
  • Treasury Inflation-Protected Security
  • Issued by Treasury
  • Principal adjusted for Inflation (using CPI)
  • Stated interest rate is constant
  • SEMI-ANNUAL Payments Fluctuate Because Stated Rate is Applied
148
Q

STRIPS

A

Separately Traded Registered Interest and Principal Securities

  • ZERO-COUPON bonds DEEPLY DISCOUNTED by U.S. Treasury
  • these ACCRETE in value = they GAIN in value every year
  • The GAIN is considered INTEREST INCOME
  • TAXED on the accretion ANNUALLY (Phantom Interest)
  • **Popular in Tax-Sheltered Accts; IRAs, COverdells, 529s
149
Q

Corporate Bond Taxation

A 
Interest is taxable at all levels
- Federal
- State (if applicable)
- City (if applicable)
Capital Gains Taxable IF bond sells at profit to investor (if prior to maturity)
150
Q

Revenue Bonds

A
  • Self-Supporting –> Backed by user fees, revenues, or assessments
  • Project-centered (ex. Hospitals, Toll roads, Airports)
151
Q

IDRs

A
  • Issued to construct sports stadium and parking lots
  • Backed by corps
  • Typically NOT EXEMPT from Federal Taxes
152
Q

Muni Bonds Taxation

A

Capital Gains: Taxable at all levels (if sold at a gain before maturity)
Federal Level: Tax free
State Level: Tax Free ONLY IF Bought AND Issued in Investor’s state of residence

153
Q

S & P Investment Grade Bonds (list)

A

AAA
AA
A
BBB

154
Q

Moody’s Investment Grade Bonds (list)

A

Aaa
Aa
A
Ba

155
Q

Define “Duration”

A
  • A time-weighted measure of the cash flows provided by a bond
    -It is a better measurement of Interest Rate sensitivity than Maturity
  • *The LOWER the Coupon Rate, the LONGER its Duration
    _ **Bonds with Coupons GREATER than 0%, Duration is ALWAYS LESS than Bond’s Maturity
  • *** The Longer a Bond’s Duration, the more its price will Change in response to a 1% change in interest rates.
156
Q

Current Yield Equation

A

Annual $ Coupon / Current Market Price X 100

157
Q

Three other terms than mean “Interest Rate”

A

Coupon Rate
Nominal Rate
Stated Rate

158
Q

List Yields from Highest to Lowest for a DISCOUNT bond.

A 
Discount Bond:
YTC         (Highest)
YTM
CY
Nominal
159
Q

List Yields from Highest to Lowest for a PREMIUM bond.

A 
Premium Bond:
Nominal    (Highest)
CY
YTM
YTC
160
Q

Do bonds have voting rights?

A

NO

161
Q

Preferred Stock

A
  • PAYS DIVIDENDS
  • NO Voting Rights
  • Considered “Senior Securities”
  • NO Preemptive Rights

Wills Series 65 (12 decks)

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