Series 7 need to work on Flashcards
letter of intent are good for
if the letter of intent is not completed
share appreciation and income paid by the fund..
a maximum of 13 months and may be backdated 90 days
the sales charge amount that applies is based on the total amount actually invested
don’t count toward completion of the letter
when calculating what investor receives when the investor redeems shares. amount is
shares *NAV
When is the sales charge deducted from purchases of mutual fund shares made under a letter of intent?
when each purchase is made
letter of intent with additional contributions will have same reduced sales charge deducted.
if customer does not invest amount stated in letter, the full sales load applies to the total investment
closed end funds in relation to sales charge
do not have a sales charge. investor pays commission or pays markup or markdown
open end funds in relation to sales charge
all sales commissions and expenses for open end fund embedded in the POP or other fees
class c shares appropriate for investors
who have short time horizons because they become very expensive over a long period of time
when doing exchanges within a family of funds like converting an investment in one fund for an equal investment in another fund of the same family. talk about gains and losses in the first fund in respect to capital gains and taxes
any gain or loss from the redemption of shares must be reported for tax purposes
a front end sales load is
the difference between the public offering price and the nav of a mutual fund share.
what is not appropriate to invest for the separate account
municipal bonds
An accumulation unit in a variable annuity contract is
an accounting measure used to determine the contract owner’s interest in the separate account.
A variable annuity’s separate account is:
used for the investment of funds paid by contract holders.
regulated under both securities and insurance laws.
A customer is receiving annuitized payments from a variable annuity. The annuitized payments are viewed for tax purposes as
part earnings and part cost basis
Contributions to a nonqualified variable annuity are
not tax deductible
A customer has a non-qualified variable annuity. Once the contract is annuitized monthly payments to the customer are:
partially a tax-free return of capital and partially taxable.
The investor has already paid tax on the contributions but the earnings have grown tax-deferred. When the annuitization option is selected, each payment represents both capital and earnings. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income.
the largest monthly check an annuitant can receive for the rest of his life is generated by
straight life
Once a variable annuity has been annuitized:
each annuity unit’s value varies with time, but the number of annuity units is fixed.
treasury bills
traded at discount to par
direct obligation of us government
not callable
in most cases, assets comprised in CDO are liquid or not liquid
not very liquid
coupon rates are usually _____ than nonconvertible bond rates of the same issuer
lower
Bondholders may not take action against the corporation if it fails to make interest payments for
income bonds
ginnie maes
They are quoted in 1/32nds.
They are traded with an accrued interest computed on a 30/360 basis.
Zero-coupon bonds must be ______ for tax purposes.
accreted
corporate debentures
certificates of indebtedness
they are unsecured bonds issued to finance capital expenditures or to raise working capital
Z tranche cmos would not be suitable for
an investor needing funds in a specified amount of time, due ot the unpredictable nature of when payment will be recieved.
very volatile
Freddie mac
a publicly owned and traded U.S. government agency that issues pass-through securities based on a pool of conventional residential mortgages purchased from financial institutions.
Sallie mae
Sallie Mae is the name for the Student Loan Marketing Association, which does not issue mortgage-backed securities. Ginnie Mae, Fannie Mae, and Freddie Mac do issue mortgage-backed securities.
If interest rates increase, the interest payable on outstanding corporate bonds will
remain unchanged
U.S. government securities that are deposited with a trustee and against which certificates are sold representing principal payments only on the securities are referred to as
stripped strips(stripped bonds)
These are zero-coupon bonds issued by the U.S. government and are subject to annual taxation on the per-year accreted amount.
cmo tax wise
fully taxable at all levels
GNMA pass-through certificates pay principal and the interest how often
monthly
CMOS liquid or not
are liquid
Planned amortization class (PAC) CMOs were designed to provide which of the following benefits compared to plain vanilla tranches?
Reduce prepayment risk for tranche holders.
A customer purchases ten 8% Treasury notes at 101-16. What is the dollar amount of this purchase?
Though the denomination of the T-notes purchased is not given, always assume par ($1,000) unless told differently in the question. Remember that government notes and bonds are quoted in 32nds. Therefore, a quote of 101-16 means 101 plus 16/32. 101 plus 1/2 = $1,015; $1,015 × 10 bonds = $10,150.=answer
Interest income from all of the following are exempt from state and local taxation EXCEPT: A) Treasury bonds. B) FNMA mortgage-backed issues. C) Series EE savings bonds. D) Treasury bills.
As a general rule, the interest income from U.S. government and agency securities is subject to federal taxation only; it is generally exempt from state and local taxation. However, the interest income from mortgage-backed securities is fully taxable.
salie mae tax exempt from
state and local levels
