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Series 65 > Unit 1 > Flashcards

Unit 1 Flashcards

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Series 65 flashcards
1
Q

Equity Security

A

Represents ownership in a company.

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2
Q

Debt Security

A

Represents a loan to the company or government.

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3
Q

Security

A

INVESTMENT THAT REPRESENTS EITHER AN OWERSHIP STAKE OR DEBT STAKE

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4
Q

Common Stock (ownership, voting rights, dividends, growth potential

A

CAPITAL APPRECIATION, INCOME (DIVIDENDS), VOTING RIGHTS, LIMITED LIABILITY, LIQUIDITY, HEDGE AGAINST INFLATION

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5
Q

Preferred Stock (ownership, voting rights, dividends, growth potential)

A

Own part of company with NO voting rights, pays a fixed dividend, priority over common stock in dividends and during liquidation, GREATER APPRECIATION

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6
Q

WHAT INFLUENCES THE PRICE OF COMMON AND PREFERRED STOCK

A

COMMON - HEALTH OF COMPANY, PREFERRED - INTEREST RATES

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7
Q

CAPITAL APPRECIATION

A

AKA CAPITAL GAINS, INCREASE IN THE MARKET PRICE OF SECURITIES

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8
Q

STOCK DIVIDEND (HOW TAXED)

A

DIVIDEND PAID IN ADDITIONAL SHARES OF COMMON STOCK, NOT TAXED TO SHAREHOLDER

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9
Q

PROPERTY DIVIDEND

A

PAY IN SHARES IN SUBSIDIARY COMPANY OR IN COMPANY PRODUCTS

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10
Q

WHAT HAPPENS TO PRICE IF COMPANY PAYS IN STOCK DIVIDENDS

A

THE PRICE OF THE STOCK WILL DROP SO THAT OVERALL VALUE STAYS THE SAME

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11
Q

STOCK SPLIT

A

ACCOUNTING PROCESS WHERE CORPORATION EXCHANGES NEW SHARES FOR OLD ONES, CHANGING THE NUMBER OF SHARES IN THE MARKETPLACE (CHANGING LARGE BILLS FOR SMALL ONES)

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12
Q

IS STOCK FREELY TRANSFERABLE?

A

YES, PREMISSION IS NOT REQUIRED OF THE COMPANY, THEY ARE LIQUID

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13
Q

RECORD DATE

A

DATE BY WHICH AN INVESTOR MUST BE OWNER OF STOCK IN ORDER TO VOTE OR RECEIVED DIVIDENDS

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14
Q

LIMITED LIABILITY

A

STOCKHOLDERS PERSONAL ASSETS ARE NOT AT RISK (COMMON OR PREFERRED), LIABILITY IS LIMITED TO INVESTEMENT AMOUNT

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15
Q

COMMON STOCK RISKS

A

MARKET RISK, BUSINESS RISK, LOW PRIORITY AT DISSOLUTION

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16
Q

MARKET RISK

A

CHANGE THAT A STOCK WILL DECLINE IN PRICE

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17
Q

BUSINESS RISK

A

DECLINE IN THE COMPANY’S EARNINGS

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18
Q

SENIOR SECURITIES VS RISIDUAL RIGHTS

A

COMPANYS DEBT AND PREFERRED SHARES, COMMON SHARES

19
Q

TYPES OF PREFERRED STOCK

A

STRAIGHT, CUMULATIVE PREFERRED, CALLABLE PREFERRED, CONVERTIBLE PREFERRED, ADJUSTABLE RATE PREFERRED

20
Q

STRAIGHT (NONCUMULATIVE) PREFERRED STOCK

A

PLAIN VANILLA, NO SPECIAL FEATURES

21
Q

CUMULATIVE PREFERRED

A

ACCRUES PAYMENTS DUE ITS SHAREHOLDERS IN THE EVENT DIVIDENDS ARE REDUCED OR SUSPENDED. IF BOARD SUSPENDS PAYMENTS AND STARTS AGAIN, PAYMENTS ARE PAID IN ARREARS

22
Q

CALLABLE PREFERRED

A

COMPANY CAN BUY BACK FROM INVESTORS AT A STATED PRICE AFTER A SPECIFIED DATE. USED TO REPLACE HIGH FIXED DIVIDEND WITH A LOWER ONE. SIMILAR TO REFINANCING A MORTGAGE, DIVIDENDS CEASE ON CALL DATE. SOLD AT PREMIUM OVER PAR

23
Q

CONVERTIBLE PREFERRED

A

OWNER CAN EXCHANGE SHARES FOR A FIXED NUMBER OF COMMON STOCK, PRICE FLUCTUATES WITH COMMON STOCK PRICE, GIVE CAPITAL GAIN POTENTIAL AND LOWERS INTEREST RATE RISK.

24
Q

ADJUSTABLE (FLOATING) RATE PREFERRED

A

DIVIDEND RATE IS TIED TO RATES OF OTHER INTEREST RATE BENCHMARKS, SUCK AT TBILLS, AND CAN BE ADJUST OFTEN, KEEPING STOCK PRICE STABLE, REDUCING INTEREST RATE RISK

25
Q

THE MOST IMPORTANT DETERMINATION WHEN INVESTING IN PREFERRED STOCK FOR INCOME?

A

ABILITY OF COMPANY TO MEET ITS DIVIDEND PAYMENTS

26
Q

PREFERRED STOCK RISKS

A

MARKET RISK (PRICE DROPS), LOSS OF PURCHASING POWER, INTEREST RATE(MONEY RISK), REDUCTION OR ELIMINATION OR DIVIDENDS

27
Q

PERPETUAL SECURITY

A

STOCK HAS NO PRESET DATE WHEN IT MATURES OR REDEMPTION DATE

28
Q

EMPLOYEE STOCK OPTIONS

A

ISSUED IN COMMON STOCK, STRIKE PRICE IS MARKET PRICE AT TIME OPTION IS GRANTED, REQUIRES A VESTING PERIOD

29
Q

TYPES OF STOCK OPTIONS

A

NONQUALIFIED STOCK OPTION (NSO/NQSO) INCENTIVE STOCK OPTION (ISO)

30
Q

NONQUALIFIED STOCK OPTION (NSO)

A

MOST COMMON TREATED AS A FORM OF COMPENSATION, TAXED AS INCOME

31
Q

BARGAIN ELEMENT

A

DIFFERENCE BETWEEN THE CURRENT MARKET PRICE AT TIME OF EXERCISE AND STRICK PRICE

32
Q

INCENTIVE STOCK OPTION (ISO)

A

STOCK PURCHASED THROUGH EXERCISE MUST BE HELD FOR 2 YEARS AFTER DATE OF GRANT AND 1 YEAR AFTER DATE OF EXERCISE. 10 YR LIMIT TO EXERCISE. PROFIT REPORTED AT LT CAPITAL GAINS. TAXED AS ALTERNATIVE MINIMUM TAX

33
Q

RESTRICTED STOCK

A

SECURITIES THAT CANNOT BE TRADED THAT ARE SOLD AS PART OF A PRIVATE PLACEMENT THAT MUST BE HELD FOR A CERTAIN PERIOD OF TIME (6 MO) AND VOLUME

34
Q

CONTROL STOCK

A

CONTROL PERSON THAT OWNS 10% OR MORE OF VOTING STOCK, MUST REPORT TO SEC (DIRECTOR, OFFICER, MAJOR SHAREHOLDER)

35
Q

SEC RULE 144 OF SECURITIES ACT 1933

A

MECHANISM FOR REPORTING SALE OF CONTROL AND RESTRICTED STOCK, FILE FORM 144

36
Q

AMERICAN DEPOSITARY RECEIPTS (ADR)

A

TRADING OF FOREIGN STOCKS IN US MARKETS

37
Q

CURRENCY RISK

A

POSSIBILITY OF AN INVESTMENTS IN ONE CURRENCY DECLINES IN EXCHANGE RATE WITH US DOLLAR

38
Q

EMERGING MARKETS

A

MARKETS IN LESS DEVELOPED COUNTIRES, POTENTIAL FOR HIGH GROWTH RATE BUT HIGH RISK

39
Q

FRONTIER MARKETS

A

LESS THAN EMERGING MARKETS

40
Q

DEVELOPED MARKETS

A

HIGHLY DEVELOPED ECONOMIES WITH STABLE POLITICAL AND SOCIAL INSTITUTIONS, LOWER RISK

41
Q

WHY INCLUDE FOREIGN SECURITIES?

A

GREATER DIVERSIFICATION, FOREIGN CAN OUTPERFORM DOMESTIC, FOREIGN NOT HIGHLY CORRELATED WITH DOMESTIC REDUCING RISK

42
Q

RISKS OF INVESTING IN FOREIGN MARKETS

A

COUNTRY RISK, CURRENCY RISK, REGULATORY DIFFERENCES (RULES, FEES, TAXES)

43
Q

COUNTRY RISK

A

COMPOSIT OF ALL RISKS OF INVESTING IN FOREIGN MARKETS

44
Q

CURRENCY RISK

A

FLUCTUATIONS IN EXCHANGE RATE

Series 65 (3 decks)

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