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Series 65 > Unit 4 > Flashcards

Unit 4 Flashcards

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Series 65 flashcards
1
Q

S Corporation

A
  • Taxed like a partnership
  • profits and losses are passed through directly to shareholders
  • no double taxation
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2
Q

C Corporation

A
  • best when you need to raise lots of capital
  • fully separates owners from business entity
  • subject to double taxation
  • only look at business when determining suitability
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3
Q

Sole Proprietorship

A
  • easiest to form and dissolve
  • owner has fully liability
  • all of owners assets are liable for debts of business
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4
Q

LLC limited liability company

A
  • combines benefits of Corporation with tax advantages of a partnership
  • owners are members not shareholders
  • company survives the death of the owners
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5
Q

Transfer on Death Accounts (TOD)

A
  • upon death property is immediately transferred to the named beneficiaries
  • is a designation of an individual account or a JTWROS
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6
Q

Joint Tenants With Right of Survivorship (JTWROS)

A
  • when one person dies all of the assets go to the other Tennant regardless of contributions
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7
Q

Tenants in Common

A
  • when TT dies their assets go into their estate

- then distributed according to their will

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8
Q

Tenancy by the entirety

A
  • can be created only by married people

- consent of both parties is required before selling or giving away interest in property

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9
Q

Trust

A
  • legal entity that offers flexibility to an individual who wishes to transfer propriety
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10
Q

Settlor (maker, grantor, trustor donor)

A
  • supplies property for trust

- creates the trust

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11
Q

Trustee

A
  • person legally holding the property held in the trust.

- a fiduciary obligated to do what is in the best interest of the beneficiaries

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12
Q

Beneficiary

A
  • person who benefits from the trust

- settlor can be a beneficiary

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13
Q

Simple trust

A
  • all in one earned must be distributed within that year
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14
Q

Complex trust

A
  • may accumulate income and distribute according to trust terms
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15
Q

Living trust

A
  • established during lifetime of maker
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16
Q

Testamentary trust

A
  • contents go into trust once person passes away
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17
Q

Revocable trust

A
  • must be living trust
  • only the maker can change or revoke
  • no estate tax benefit
  • becomes irrevocable at death
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18
Q

Irrevocable trust

A
  • settlor gives up all ownership

- settlor can retain some interest in certain situations

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19
Q

Grantor retained annuity trusts

A
  • beneficiaries receive fixed annuity each year after death of settlor
  • major tax benefits
  • tax liability falls on maker
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20
Q

Estate accounts

A
  • similar to trusts have fiduciary oversight

- executor makes all of the investment decisions

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21
Q 
Fiduciary account 
Examples:
Trusts 
Executor 
Administrator 
Guardian 
Custodian 
Receiver in bankruptcy 
Conservator for incompetent person
A

Anyone legally appointed and authorized to represent another person

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22
Q

Full power of attorney

A

Allows Person who isn’t owner to

Deposit, withdraw, make investment decisions

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23
Q

Limited power of attorney

A

Some but not total control of account

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24
Q

Durable power of attorney

A
  • POA survives mental incapabilities but not death
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25
Q

Financial profile

A 
Debt
Tax status 
Income sources
Balance sheet 
Expenditures 
Liabilities
26
Q

Non financial profile

A 
Investment experience 
Attitude/ values
Number/ age of dependents 
Employment stability
Employment of family members 
Family health/ education needs
27
Q

Risk tolerance

A
  • Clients objectives
  • Amount available for investing
  • Clients aversion to risk
  • liquidity requirements
  • how much loss can you afford
  • time horizon for investments
  • expectations
28
Q

Preservation of capital

A
  1. Bank insured CDs
    Money market account
    Bank insured Bonds
    Savings accounts
29
Q

Current income

A

Government/ agency bonds
Corporate bonds/notes
Preferred stock
Utility company stocks

30
Q

Capital growth

A

Stocks

31
Q

Speculation

A

Highly volition stocks
High yield bonds
Options or indexes
Commodity

32
Q

College tuition

A

Zero coupon bonds maturing in time for college

33
Q

Capital needs analysis

A

Pay off debt
Income for survivor
College tuition
Estate taxes

34
Q

Disability income options

A

SS
Workmans comp
Disability insurance

35
Q

Constant ratio plan

A

Keep same amounts of stock to cash

36
Q

Constant dollar amount

A

Keep same amount of dollars in account

37
Q

Tactical asset allocation

A

Active management of portfolio

- adjusting stocks to bonds ratio to capitalize on market cycles

38
Q

Buy and hold

A

Low fees and maintenance

39
Q

Growth manager

A

Looks for stocks generating earning momentum

  • looking for high PE ratio high PB ratio
  • little to no dividends
40
Q

Value manager

A

Low PE ratio
High dividend
Stock with large cash surplus

41
Q

Large cap

A

10 billion plus

42
Q

Mid cap

A

2-10 billion

43
Q

Small cap

A

300 mil- 2 billion

44
Q

Contrarian manager

A

Takes position opposite of other managers or the general market

45
Q

Barbell income strategy

A

Buying bonds with short term and long term maturities with nothing in the middle

46
Q

Bullet income strategy

A

Pick a date and buy bonds that mature during it.

Do this for multiple years

47
Q

Ladder income strategy

A

Bonds bought at same time mature at different times.

48
Q

Sharpe ratio (risk adjusted ratio)

A

(Average annual return - risk free rate)/ standard deviation

49
Q

Quick ratio

A

Current Assets (excluding inventory)/ Current liabilities

50
Q

Monetary policy

A
  • Controlled by federal reserve

- determines size and rate of growth if the money supply

51
Q

Fiscal policy

A

Controlled by president

- way government adjusts spending and tax levels to influence nations economy

52
Q

Summary plan document

A

Required to give to plan participants by plan administrator.
IA does not give it out.

53
Q

Expected rate of return

A

The probability of each possible return outcome and multiplying it by the return outcome in self

54
Q

Feasible set

A

All portfolios that can be constructed from a given set of stocks.
Under modern portfolio theory

55
Q

Investment policy statement

A
  • Methods of performance measurement.

- way to determine cashflow needs

56
Q

Specialist

A

Broker dealer who buys and sells listed securities on an exchange

57
Q

ERISA 404(c)

A

Places investment risk with plan participant

58
Q

Market maker

A

Broker dealer who buys and sells unlisted securities over the counter

59
Q

Total return

A

How a security performed over time.

$20 stock $1 dividend, sold after a year for $24
Total return= $5 or 25% ($5/$20)

60
Q

Customer balance sheet

A

Assets: Home, property, investments, jewelry, bank account

Liabilities: mortgage, loans

Not included: salary, utilities, taxes, investment income, monthly loan

61
Q

Statement of cashflow

A

Salary, utilities, taxes, investment income, monthly loan

Not included: assets and liabilities

62
Q

Index option

A

Gives the holder the right to buy or sell he value of an underlying index

Series 65 (3 decks)

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