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Series 7 > She chapter 2 pt 2 > Flashcards

She chapter 2 pt 2 Flashcards

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Series 7 Top-off Exam flashcards
1
Q

short-term unsecured promissory notes issued by companies. Used to raised cash to finance accounts receivable and seasonal inventory gluts. Maturities range from 1 to 270 days

A

commercial paper

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2
Q

direct short term debt obligations of the us government. Issued weekly with maturities 4 weeks, 13, 26 and at times 52

A

treasury bills

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3
Q

though t notes and t bonds are issued with longer maturities than t bills, once the notes and bonds have only one year left to maturity they are considered

A

money market instruments

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4
Q

agreement between buyer or seller to conduct a transaction and then reverse that transaction in the future.

A

repurchase agreements

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5
Q

a dealer agrees to buy securities from an investor and sell them back at a higher price

A

reverse repurchase agreement

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6
Q

The federal reserve bank mandates how much money its member banks must keep on reserve at the FRB. Any deposits in excess of the required amount are known as

A

federal funds

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7
Q

why would you place money market securities in a clients portfolio

A

highly liquid
very safe
a good place to invest money that will be needed soon(short term)

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8
Q

following risk associated with money market securites

A

rate of return is quite low (not suitable for long term investors )

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9
Q

These are derivative securities. This means that they derive their value from that of an underlying instrument, such as stock, stock index, interest rate or foriegn currency

A

options

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10
Q

under rule 144 how long must the a restricted security be held before it can be sold

A

6 months

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11
Q

Purchaser or holder
long
pays premium
is in control

A

buyer

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12
Q

writer
short
receives premium
takes on obligation

A

seller

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13
Q

an investor may buy calls ( )

A

go long

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14
Q

an investor may sell calls ( )

A

go short

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15
Q

long call( )

A

purchase

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16
Q

buyers of calls want the market price of the underlying stock to

A

rise

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17
Q

short call ()

A

sale

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18
Q

writers of calls what the market price of the underlying stock to

A

fall or stay the same

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19
Q

an investor may buy puts()

A

go long

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20
Q

an investor may sell puts()

A

go short

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21
Q

long put

A

purchase

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22
Q

buyers of puts want the market price of the underlying stock to

A

fall

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23
Q

short put

A

sale

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24
Q

a call buyer is ____because he wants the market to ___

A

bullish, rise

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25
Q

a call writer is ___ because he wants the market to

A

bearish fall

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26
Q

a put buyer is ___ because he wants the market to

A

bearish fall

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27
Q

a put writer is ____ because he wants the market to

A

bullish rise

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28
Q

a call is in the money when
a call is at the money when
a call is out of the money when

A

the price of the stock exceeds the strike price of the call

the price of the stock equals the strike price of the call

when the price of the stock is lower than the strike price of the call

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29
Q

intrinsic value

A

is the same as the amount a contract is in the money

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30
Q

call has intrinsic value when

A

the market price of the stock is above the strike price of the call

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31
Q

do options ever have negative intrinsic values

A

no

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32
Q

options that are at the money or out of the money have an intrinsic value of

A

zero

33
Q

a call option is at parity when

A

the premium equals intrinsic value

34
Q

a put is in the money when
a put is at the money when
a put is out of the money when

A

when the price of the stock is lower than the strike price of the put

when the price of the stock equals the strike price of the put

when the price of the stock is higher than the strike price of the put

35
Q

a put has intrinsic value when

A

when the market price of the stock is below the strike price of the put

36
Q

a put value is at parity when

A

when the premium equals intrinsic value

37
Q

long call buyers are bearish or bullish

A

bullish

38
Q

by purchasing calls an investor can profit from an ____in a stocks price

A

increase

39
Q

potential gain for call buyers is

A

unlimited

40
Q

most a call buyer can lose is the

A

premium paid

41
Q

call sellers(writes) are bearish or bullish

A

bearish

42
Q

by writing call, an investor can profit

A

if the stock price falls

43
Q

call writers max gain is

A

premium they received

44
Q

call writers max loss

A

unlimited

45
Q

put buyers are bearish or bullish

A

bearish

46
Q

by purchasing puts, an investor can profit from a

A

decrease in a stocks price

47
Q

the most a put buyer can lose is the

A

premium paid

48
Q

put sellers(writers) bearish or bullish

A

bullish

49
Q

a put writers maximum gain is the

A

premium recieved

50
Q

a put writers max loss is the

A

put strikes price- the premium recieved

51
Q

the clearing agent for listed options contracts.

Primary functions are to standardize, guarantee the performance of and issue option contracts

A

options clearing corporation

52
Q

listed options trade from

A

9:30- 4:00pm et

53
Q

listed options settle on

A

the next business day after the trade

54
Q

listed options expire on

A

the third friday of the experation month at 11:59 pm

55
Q

listed options can be exercised by

A

the owner from the time of purchase until they expire

56
Q

any contract that is in the money by at least .01 will be

A

exercised automatically at expiration for the holder unless the holder gives a do not exercises instruction

57
Q

when occ receives an exercise notice they

A

assign the exercise notice to a short broker dealer

58
Q

the occ assigns exercises notices to short broker dealers on a

A

random basis

59
Q

options contracts are traded with or without a certificate

A

without

60
Q

an investors proof of ownership is the

A

trade confirmation

61
Q

the owner of a call(party long the contract) has

A

the right to buy the stock at the strike price

62
Q

the owner of a put(party long the contract)

A

has the right to sell the stock at the strike price

63
Q

only owners of options contracts, those who are ___ in the contracts have the right to exercise them

A

long

64
Q

writers of contracts, those who are ___the contracts, will be assigned to fulfill their obligation to perform: ether sell, if short a call, or buy if long a put

A

short

65
Q

call or put buyers can exercise a contract any time before expiration if the contract is a

A

american style option

66
Q

can be exercised on the expiration day only

A

european

67
Q

the ___must be provided at or before the time the account approval

A

occ options disclosure document

68
Q

all options accounts must untimately be

A

approved by a firms registered options principal

69
Q

15 days after account approval, customer must

A

return signed options agreement

70
Q

if the contract is covered

A

the writer already owns the underlying security

71
Q

uncovered(naked)

A

writer does not own the underlying security

72
Q

more risky naked on covered

A

naked

73
Q

corporation or trust that pools investors money and then invests that money in securities on their behalf

A

investment company

74
Q

investment companies are subject to regulations regarding how their shares are sold to the public, they are regulated by who

A

investment company act of 1940

75
Q

classifies investment companies into 3 broad types

face amount certificate companies

unit investment trusts

management investment companies

A

investment company act of 1940

76
Q

have sub accounts that are defined as either units or open-end management investment companies

A

variable annuaties

77
Q

a contract between an investor and an issuer in which the issuer guarentees payment of a stated(face amount) sum to the investor at some set date in the future

A

face amount certificates

78
Q

an investment company organized under a trust indenture

do not have board of directors (they have trustees)

A

unit investment trust

79
Q

redeemable interests also known as

A

units or shares of beneficial interest

Series 7 (27 decks)

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