Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Series 6 > vocab 2 > Flashcards

vocab 2 Flashcards

1
Q

The __________________ is the rate of interest banks charge each other on overnight loans.

A

fed funds rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Is the fed funds rate considered the least or most volatile rate?

A

Most Volatile rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

In proper order, list the four phases of the business cycle.

A

1) Expansion - 2) Peak - 3) Recession / Contraction - 4) Trough

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

__________________________ is the measure of goods and services produced by the U.S. worldwide.

A

Gross National Product (GNP)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

_____________________ measures the goods & services produced within the U.S., disregarding the producer’s origin.

A

Gross Domestic Product (GDP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

A decline in GDP for two successive quarters is defined as a ____________.

A

recession

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What economic theory emphasizes government intervention and the use of fiscal policy to manage the economy?

A

Keynesian Economic Theory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What economic theory emphasizes controlling the money supply to manage the economy?

A

Monetary Economic Theory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

If interest rates are higher in the U.S. than overseas, what should happen to the value of the U.S. dollar?

A

It should strengthen as more foreign money is being invested in the U.S.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

______________ is the rate that banks charge their most creditworthy corporate clients.

A

Prime Rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Define parity

A

The value of two investments being equal, even, or the same

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

A bond convertible at $25 is trading at $1,150, and the stock is trading at $30. Is the bond at parity with the stock?

A

No, the bond’s parity price is $1,200. The bond can be converted to 40 shares selling at $30, which equals $1,200.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

A bond convertible at $50 is trading at $1,200. For parity, where should the stock be trading?

A

Conv. ratio = $1,000 ÷ $50 = 20 sh. The stock needs to trade at $60 to be at parity with the bond ($1,200 ÷ 20 = $60).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

ABC = $50. ABC’s bond is convertible at $40 and callable at 105. Is the call or conversion and sale more profitable?

A

Conversion and sale equals $1,250 (25 shares x $50), while the call only provides $1,050.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

____________ occurs when the supply of goods exceeds the demand for goods.

A

Deflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Deflationary periods are characterized by __________________ prices.

A

falling/decreasing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

___________ is what occurs when there is “too much money chasing too few goods.”

A

Inflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

True or False: Inflation is a persistent rise in the general level of prices.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Would inflationary periods be characterized by rising or falling interest rates?

A

Rising

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

The _______________________ is often considered the most important measure of inflation.

A

Consumer Price Index (CPI)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

True or False: Covered call writing is a conservative option strategy designed to generate income.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is a covered call position?

A

The sale of a call (obligation to sell) against stock that is owned

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

True or False: Common stockholders have the right to vote for the payment of dividends.

A

alse. Dividend payments are determined by the board of directors.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

True or False: Both common and preferred stockholders are offered preemptive rights.

A

False. Preemptive rights are only offered to common stockholders.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

If a corporation executes a stock split, is there a resulting gain or loss for existing stockholders?

A

No, the overall position stays the same. Forward = more shares at lower price; Reverse = fewer shares at higher price.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

ABC sets a record date of Wednesday, Oct. 19. Would a buyer of ABC on Monday, October 17 be entitled to the dividend?

A

No, the investor must own (trade settles) on or before the record date. This trade would not settle until October 20.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

XYZ’s record date is Thursday, May 3. With a regular-way trade, when could Emma sell her stock, but keep the dividend?

A

On Tuesday, May 1 or later. She must remain the owner at least through May 3 to keep the dividend.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What can be determined if given the following bond information? 7% bond, due 6/1/20XX, yielding 8.7%

A

$70 interest ($35 each 6/1 and 12/1), matures on June 1, 20XX, is a discount since YTM (8.7%) is above the nominal (7%)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Mack, in the 35% tax bracket, is earning 5.4% on a tax-free municipal bond. What is his taxable equivalent yield?

A

The formula is: Tax-Free Yield ÷ (100% - Tax Bracket %). 5.4% ÷ 65% = 8.3%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

The ________________ the duration, the greater the bond’s price sensitivity.

A

longer/greater

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Rank in order, from highest to lowest, the three yields on a bond priced at a discount.

A

YTM, Current Yield, Nominal Yield

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Rank in order, from highest to lowest, the three yields on a bond priced at a premium.

A

Nominal Yield, Current Yield, YTM

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

A bond has a 12% coupon and is trading for $1,200. What is a realistic YTM for this bond?

A

YTM must be less than 10% since the current yield ($120 ÷ $1,200) is 10%.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Define duration.

A

The measure, expressed in years, of a bond’s price sensitivity to interest rate changes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

What does a normal, positive, ascending, or upward sloping yield curve indicate?

A

Bonds with longer maturities have higher yields than bonds with shorter maturities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

The yield curve is ___________________________ when short-term bonds have higher yields than long-term bonds.

A

inverted (negative/descending)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

True or False: A flat yield curve reflects both long and short-term yields being the same.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

As it relates to securities law, what does the acronym USA mean?

A

The Uniform Securities Act, also known as the blue-sky laws

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

Are ADR holders exposed to currency risk?

A

Yes, since these securities will track the underlying stock.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

The NAV of a mutual fund is like the _____ price of a stock.

A

bid

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

The POP of a mutual fund is like the _____ price of a stock.

A

ask

42
Q

Specialists are found in what type of trading venue?

A

Physical auction markets

43
Q

A mutual fund portfolio manager wanting to generate income would engage in what option strategy?

A

Covered call writing

44
Q

Call buyers and put writers are __________.

A

bullish

45
Q

Put buyers and call writers are __________.

A

bearish

46
Q

On Monday at 10:00 a.m., a customer places a call to buy an ETF. What price will she pay?

A

The current ask (offer). ETFs are traded throughout the day.

47
Q

Is a hedge fund investment considered liquid?

A

No

48
Q

Who typically buys hedge funds

A

Qualified (sophisticated) investors through Reg. D offerings

49
Q

May hedge funds sell stocks short and use margin?

A

Yes

50
Q

What is implied when a growth fund has a beta of 1.5?

A

The fund is more volatile than the general stock market.

51
Q

What are the two main types of municipal bonds?

A

General obligation (GO) and revenue bonds

52
Q

________________ is considered risky since it is junior to both preferred stock and bonds.

A

Common stock

53
Q

Regarding rights, options, and warrants, which instrument has the longest maturity?

A

Warrants

54
Q

Who sets the prime rate?

A

Individual banks, not the Federal Reserve Board

55
Q

What is a judicially approved restructuring?

A

This is a technical term for bankruptcy

56
Q

What is the capitalization of a corporation?

A

The stocks and bonds a company has issued in order to raise funds for its own operations

57
Q

What is the portfolio of a corporation?

A

The corporation’s investments

58
Q

What security helps to finance foreign trade?

A

A banker’s acceptance (BA)

59
Q

What type of bond typically offers a lower yield?

A

Municipal bonds, since the return is tax-free

60
Q

The spread represents the difference between the _____ and _______ price of a stock.

A

The spread represents the difference between the bid and ask price of a stock.

61
Q

What does it mean to say an issuer is heavily leveraged?

A

The issuer has more debt than equity outstanding.

62
Q

A yield has gone from 3.44% to 3.53%. What is the amount of the increase?

A

9 basis points (BPs). Each full percentage point is equal to 100 BPs.

63
Q

Identify the acronym: SIMPLE

A

Savings Incentive Match Plans for Employees

64
Q

What is a blue chip stock?

A

A well-known company that is a leader in its field

65
Q

What is not included in the expense ratio of a mutual fund?

A

Sales charges are not included in the expense ratio.

66
Q

What is the current yield on a 4% coupon bond selling at 50?

A

$40 ÷ $500 = 8%

67
Q

On a discount bond, which yield is the highest?

A

TM. Remember the seesaw on a discount bond - NY, CY, YTM (lowest to highest).

68
Q

On a premium bond, which yield is the highest?

A

Nominal. Remember the seesaw on a premium bond - NY, CY, YTM (highest to lowest).

69
Q

Jim owns a 5% bond maturing on 6/1/2022. What would Jim receive at maturity if the bond pays interest semi-annually?

A

$1,025, which represents the $1,000 principal value plus the final coupon payment of $25

70
Q

Which government bonds are non-marketable?

A

Series HH and EE Bonds have no secondary market.

71
Q

What is the significance of a narrow spread in a stock quote?

A

A narrow spread (small difference between bid and ask price) is often indicative of active trading.

72
Q

What does the term good delivery mean?

A

The security is in proper form and endorsed or accompanied by a stock power.

73
Q

Identify the acronym: SBI

A

Shares of Beneficial Interest (This represents a client’s UIT holdings.)

74
Q

Which market is considered negotiated?

A

The over-the-counter (OTC) market, such as Nasdaq. In the OTC market, market makers negotiate prices.

75
Q

When acting in a ____________ capacity, a firm is assuming risk.

A

When acting in a principal capacity, a firm is assuming risk (e.g., a firm-commitment underwriting).

76
Q

When acting in an ________ capacity, firms assist customers, but do not assume risk.

A

When acting in an agency capacity, firms assist customers, but do not assume risk (e.g., a best-efforts underwriting).

77
Q

What action would the Federal Reserve take in an inflationary environment?

A

Tighten credit to make money more expensive

78
Q

What must be included in a mutual fund confirmation?

A

Potential redemption fees or CDSCs that may apply

79
Q

Issuers of bonds may be referred to as __________.

A

debtors.

80
Q

Zero coupon bonds are purchased at a __________ and mature at ____________.

A

discount, par value

81
Q

True or False: Municipal bonds may be referred to as tax-exempt bonds.

A

True

82
Q

To protect a long position, an investor would _____ a _____ option as a hedge.

A

To protect a long position, an investor would buy a put option as a hedge.

83
Q

Is a real estate investment trust (REIT) considered a mutual fund?

A

No. A REIT invests primarily in real estate rather than securities.

84
Q

When must RRs complete the Regulatory Element of Continuing Education?

A

On the 2-year anniversary of their registration and every 3 years thereafter.

85
Q

True or False: Firm Element Continuing Education requires BDs to update employees on job and product-related subjects.

A

True

86
Q

What three items must be specified on a not held order?

A

Action (buy/sell), Amount (quantity), and Asset (security)

87
Q

For how long may a not held order be maintained?

A

A not held order will be considered a day order.

88
Q

The Trust Indenture Act of 1939 regulates ________________ offerings.

A

corporate bond offerings (NOT municipal or government offerings).

89
Q

What is the primary purpose of the Securities Act of 1933?

A

Provide investors with full and fair disclosure regarding new issues (prospectus)

90
Q

List the securities that are exempt from registration.

A

Government/municipal bonds, commercial paper, bankers’ acceptances, bank issues, non-profit and small business issues

91
Q

Though some securities are exempt from registration, nothing is exempt from the ____________ provisions of the Act.

A

anti-fraud

92
Q

n a firm commitment underwriting, unsold securities are retained by ________________.

A

the syndicate.

93
Q

In a best-efforts underwriting, unsold securities are retained by ______________.

A

the issuer.

94
Q

What type of underwriting is cancelled if the entire issue is not sold?

A

All-or-None

95
Q

What type of underwriting is cancelled if a specified portion is not sold?

A

Mini-max

96
Q

A ___________ underwriting is used for shares not purchased through a rights offering.

A

Stand-by

97
Q

____________ is the only form of price manipulation allowed by the SEC.

A

Stabilization

98
Q

What system is used for the issuance of Treasury securities?

A

An auction

99
Q

What is the purpose of a Tombstone Ad?

A

It calls attention to the new issuance of securities and members of the syndicate.

100
Q

The Securities Exchange Act of 1934 regulates the ____________________.

A

Secondary Market.

Series 6 (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions