question

Agent

answer

person, other than b/d who represents b/d in effecting or attempting to effect the purchase/sale of issuer's securities, generally work for a b/d but can represent an issuer.

question

Broker/Dealer (B/D)

answer

person engaged in the business of effecting transaction in securities for the account of others or for the person's own account

question

People Who are NOT B/D

answer

Agents, issuers, banks/saving institutions, a person who has no place of business in the state if: he effect transactions with an issuer, other b/d, banks/savings inst, trust comp, insurance comp, investment comp, the person is licensed in the state deals with people who are not residents of the state.

question

ABC

answer

Agent, broker, commission

question

PDM

answer

Principal, dealer, markup

question

People who are not Investment Advisors

answer

Investment advisor reps, L A T E, b/d or agent who does not receive compensation for offering investment advise, publisher of bon a fide newspaper, a federal covered investment advisor, bank

question

B/D registration

answer

Must register with state and fed

question

Investment Advisor Registration

answer

Must register with either SEC or State

question

Federal Covered Security

answer

covered under section 18 B of the USA.

question

Section 18 B of USA/ federal covered securities

answer

Securities listed on the NYSE, AMEX, The national market system, NASDAQ, securities issued by an investment company

question

Investment Advisor Rep registration

answer

Must register with the state, unless it has a place of business in the state

question

Issuer

answer

A person that issues or proposes to issue a security

question

Issuer Transaction

answer

If the company makes money off the transaction

question

Offer to purchase

answer

includes an attempt or offer to obtain, or solicitation of an offer to sell, a security or interest in a security for value.

question

Not a Security

answer

an insurance contract or annuity, an interest in a contributory or noncontributory pension or welfare plan

question

Non-Exempt Security

answer

A security not exempt from State laws, must register with the state, however if a NON-EXEMPT stock is traded in an exempt transaction, it would NOT violate the USA

question

Exempt Transactions vs. Exempt Securities

answer

A transaction exemption must be established for each transaction, whereas a security exemption retains its exemption when issued and in trading.

question

P/E Ratio

answer

Earnings per share/ current market price

question

Form 1o-Q

answer

Financial Reporting analysis filed 3 times a year

question

Bond Duration

answer

Shorter the duration (maturity), the lesser impact interest rates have on the bond's price. Longer the duration (maturity) the greater the impact

question

Market Risk/Systematic risk

answer

Uncertainty the price of a stock will drop even when earnings are strong

question

Real Return

answer

Return minus inflation

question

Technical Analysts

answer

Looks at market trends and timing activity

question

Fundamental Analysts

answer

Looks at financial ratios of a company

question

Coincident Economic Indicators

answer

Industrial Production

question

Leading Economic Indicators

answer

Stock prices, manufacturing orders

question

Inflation Risk

answer

Uncertainty an investment's purchasing power will decrease due to the shrinking value of currency

question

Duration Definition

answer

The effects of interest rate change on the price of a bond

question

Recession

answer

Drop in GDP for 2 consecutive quarters

question

Accounting equation

answer

Assets-Liabilities=Share Holder's Equity

question

Beta

answer

stocks volatility compared to overall market

question

Unsystematic Risk/Company risk

answer

risk an individual stock will perform badly, diversification can lower reduce risk

question

Inherited Stock Basis

answer

fair market value of the stock on the day the descendent dies

question

Value Manager

answer

seeks companies the market has ignored by analyzing financial statements

question

Buying Put Option

answer

betting stock price goes down, right but not the obligation to buy at strike price

question

Buying Call option

answer

betting stock price goes up, right but not the obligation to sell at strike price

question

Writing Call option

answer

looking for capital gains on stock, believes the stock price will stay the same or go down

question

Large Capitalization Style

answer

distinguishes between investing in a small cap company versus a large capitalization company

question

Gifts of securities

answer

the market value at date of gift is used to determine if any gift taxes are due, however donor's cost basis is passed to the recipiant

question

Growth Managers

answer

focus on earnings momentum

question

Contrarian Manager

answer

takes positions opposite those of the market as a whole. They are buying when others are selling and selling when others are buying

question

NSMIA Federal Covered Advisor

answer

a person who is either required to register with the SEC under the Investment Advisers Act of 1940 or who is specifically excluded from the definition of investment adviser under that act.

question

Exempt Securities under Act of 1933

answer

Treasury securities, agency securities, and municipal securities

question

Commercial Paper

answer

debt security, loans to the issuing company, issued to raise working capital, are senior to preferred stock

question

supply side economics

answer

heavy taxing and government intervention have negative effects on the economy

question

457 Plan

answer

retirement plan for municipal employees and independent contractors

question

Preemptive Rights

answer

allows common stock holders to get additional shares of stock before they are offered to the public to maintain there percentage of ownership

question

Variable Annuities

answer

variable payments, variable rate of return, investment risk assumed by annuitant, portfolio of stocks, bonds, money market funds, separate account, resistant to inflation, need insurance and securities license/regulations

question

Fixed Annuities

answer

guaranteed fixed payments, guaranteed interest rate, investment risk assumed by insurance company, fixed income securities, general account, vulnerable to inflation, need insurance regulation only

question

Index Annuities

answer

allows for market participation with a guarantee against loss, helps overcome inflation risk and market risk

question

Participation rate

answer

when an annuitant is credited with a specific percentage of the growth of the index

question

Accumulation Stage

answer

The pay in period for an annuity

question

Accumulation Units

answer

represents an investors share of ownership in the separate accounts

question

Annuitizing

answer

the investor converts from the accumulation stage to the distribution stage, locks in a specified payment option

question

Variable Annuity Payments

answer

do not guarantee a payment amount b/c the insurance company cannot guarantee the separate account's performance

question

Joint Life with Last Survivor Annuity

answer

annuity covers two or more people, and payment is conditioned on all of their lives

question

Face Amount Certificate Companies

answer

pay a fixed rate of return, do not trade on the secondary market, redeemed by the issuer, classified by investment companies

question

Unit Investment Trust

answer

do not have board of directors, do not employee investment advisors, do not actively trade securities, organized under a trust

question

Open End Fund

answer

do not specify the exact number of shares it intends to issue, can raise an unlimited amount of investment capital, sells redeemable securities

question

POP

answer

NAV per share plus any sales charge

question

NAV

answer

net asset value, calculated daily, calculated by removing the funds liabilities from its total assets

question

Close End Fund

answer

conducts common stock offering when issues new shares, fixed number of shares are offered, known as publicly traded funds, buy/sell shares on secondary market, supply and demand determine bid/ask price, may trade at premium/discount to NAV, no sales charge

question

Bid price

answer

price the investor can sell at

question

Ask price

answer

price the investor can buy at

question

Front End Load Fees

answer

difference between POP and net NAV, reflected in the funds public offering price

question

Back End Load Fees

answer

contingent deferred sales loads

question

12b-1 Fees

answer

asset based fees, not a sales charge

question

Class A shares

answer

front end load fees, fees added to the NAV when investor purchases

question

Class B shares

answer

back end load fees, aka contingent deferred sales charge, charged when the investor redeems shares, decline over time

question

Class C shares

answer

continuous 12b-1 fees, level load, no sales charge to purchase

question

Letter of Intent

answer

promise to invest more money with the same mutual fund, helps lower overall sales charge, must complete within 13 months

question

Liquidity

answer

money market funds

question

Life Insurance

answer

Contract between an insurance company and an individual that provides money to named beneficiaries in an event of the insured's death

question

Term Insurance

answer

Insurance for a specific period, pay the death benefit only if the person dies during the designated term, do not accumulate cash

question

Whole Life Insurance

answer

Protection for the whole life, premium remains the same, the death benefit is the face of the policy, accumulates cash which = the cash surrender value which is held in the insurer's general account

question

Universal Life Insurance

answer

Pay higher interest rates to combat inflation, flexible death benefit and premiums, surrender value grows according to current interest rates

question

Current Annual Rate

answer

Varies with current interest rates and market conditions

question

Contract Rate

answer

the minimum guaranteed interest rate

question

Option 1 (A)

answer

Death benefit for universal life insurance - provides a level death benefit equal to the face amount of the policy

question

Option 2 (B)

answer

Death benefit for universal life insurance - provides an increasing death benefit equal to the policy's face amount plus the cash value account

question

Variable life Insurance

answer

Premiums are invested in equities, considered a security, offers a minimum guaranteed death benefit plus a variable death benefit on the cash that was invested

question

General Partners

answer

active investors in a limited partnership who assume responsibility for all aspects of the partnership

question

Limited Partners

answer

passive investors with no management ties to the company

question

Private Placement Partnerships

answer

usually offered to accredited investors, limited partners contribute a large amount of money, are exempt from registration with the SEC

question

Writing Puts

answer

believes the stock price will rise, keeps premium if the option goes unexercised, means of buying stock at a reduced price

question

Forward Contracts

answer

exchange a commodity between buyer and seller at a time agreeable to both

question

Futures Contracts

answer

exchange traded obligations, the buyer goes long and is responsible for the full contract

question

Exchange Specialist

answer

member of the NYSE stock exchange who executes orders for others and who acts as a market maker to keep an orderly market

question

Market Maker

answer

preforms similar duties as the specialist in the OTC (over the counter) markets

question

Traditional IRA

answer

Tax deductible annual contribution of 5500 (single) or 11000 (couple). Income and capital gains are taxed when funds are withdrawn at ordinary income levels. Distributions must start at 70 1/2 years of age

question

Roth IRA

answer

Contributions are not tax deductible. Regular distributions are withdrawn tax fee as long as the account as been opened for 5 years. Contribution limits of 5500 (single) or 11000 (couple). No required distributions at any age.

question

SEP IRA

answer

Simplified employee pension plans, for self employed individuals, allows employer to contribute tax deductible contributions to an IRA for employees

question

Eligible Employee for SEP IRA

answer

must be 21 years old, performed services for the employer for 3 of the last 5 years, and received $550 in compensation in the current year

question

Keogh Plans

answer

qualified plans for self employed individuals and owner/employees of unincorporated business

question

Keogh Plan Employee Eligibility

answer

Full time employee who worked at least 1000 hours, tenured employees who have completed one or more years of employment, adult employees who are 21 years or older

question

403 b Plans

answer

qualified tax deferred retirement plans for employees of public schools, and tax exempt nonprofit organizations such as churches and charitable institutions, max 17,500 contribution limit

question

501 c Plans

answer

qualified tax deferred retirement plans for employees of private colleges and universities, trade schools, parochial schools, zoos, museums, research foundations, private hospitals, and medical schools

question

Section 457 Plans

answer

Deferred compensation plan used for state workers and certain tax exempt organizations, except churches. The plans are exempt from ERSIA, no rollover ability, no 10% penalty for early withdrawal

question

ERISA

answer

Employee Retirement Income Security Act of 1974: Eligibility, Funding, Vesting, Communication, Nondiscrimination. Must be set up with a trust agreement

question

Funding Under ERISA

answer

If a company offers a retirement plan, all employees are covered if they are at least 21 years old, have one year of service, and work 1000 hours per year

question

Funding under ERISA

answer

Funds contributed to the plan must be separate from other assets. The plan's trustee must follow the prudent investor guidelines

question

Vesting under ERISA

answer

Employees must be entitled to their entire retirement within a certain time

question

Communication under ERISA

answer

plan must be in writing, and employees must be kept informed of benefits, availability, account status, and vesting procedure no less than annually.

question

Nondiscrimination Under ERISA

answer

formula determines the employee benefits and contributions. This ensures fair treatment

question

Nonqualified Plans

answer

does not allow the employer a tax deduction for contributions, instead the employer receives a tax deductions when the money is paid out.

question

Deferred Comp Plan

answer

Nonqualified plan, employee agrees to defer compensation until retirement

question

Payroll Deduction Plan

answer

Funds are deducted from paycheck, after taxes are with held, and may be invested

question

Coverdell Education Savings Accounts

answer

After tax contributions which accumulate on a tax deferred basis for student beneficiaries, must be made before the beneficiary turns 18, funds used for education expenses, funds must be distributed by the beneficiaries 30th birthday, yearly contribution limit is 2,000 per beneficiary

question

529 Plans

answer

state operated investment plans which offer tax deductions for education expenses

question

Prepaid 529 plan

answer

allow people to prepay for tuition at current prices. Maximum contributions is 70,000 if single, 140,000 if married with gift tax consequences. Earnings exempt from federal taxes and most state taxes (if a home state plan)

question

College Savings 529 plan

answer

allows an account owner to set up an account for a beneficiary for all education expenses. After tax funds are invested and used for any college or university. Maximum contributions is 70,000 if single, 140,000 if married with gift tax consequences. Earnings exempt from federal taxes and most state taxes (if a home state plan)

question

New Account Info under USA Patriot Act of 2001

answer

Full name, date of birth, address and telephone #, social security number or EIN number

question

Power of attorney/discretionary power

answer

allows a part other than the account owner to make investment decisions

question

Margin Account

answer

allows a customer to borrow money for investing. investors use financial leverage b/c they increase the potential for gain/loss.

question

Short Sale

answer

the investor borrows stock from a b/d and sells it in anticipation of a market decline in order to buy it back at a lower price and profit by the difference between the sale price and the purchase price

question

Joint TIC account

answer

if someone dies their fraction of the interest in the account is retained by the other tenants estate and not passed on to the surviving beneficiaries. When the last account owner passes the funds are divided dependent upon terms of the person's will. Does not have to be divided equally

question

Joint tenants with right of survivorship (JTWROS)

answer

the deceases interest pass to the surviving account tenants. the account owners have an equal and undivided interest of the funds. when all account owners pass the trust is passed down to the survivors and the other party becomes sole owner of the account

question

TOD accounts

answer

Easiest way for accounts that are held at brokerage firms from becoming subject to probate when someone passes. When the account owner dies the funds are transferred to beneficiaries. The clients will does not determine who gets the funds.

question

Fiduciary

answer

Anyone legally appointed and authorized to represent another person, act on that person's behalf, and make decision necessary to the prudent management of that person's account. Trades made by the fiduciary must be consistent with the trust's investment objectives

question

Full Power of Attorney

answer

allows someone who is not the owner of the account to deposit or withdraw cash or securities and make investment decisions for the account owner

question

Limited Power of Attorney

answer

allows someone to have some but not total control over the account

question

Durable power of Attorney

answer

allows someone to have control over the account upon the grantor's incapacitation, however upon death the power is terminated

question

Custodial Accounts

answer

the custodian for the owner enters all the trades

question

Discretionary Accounts

answer

decide which security, the number of shares, and to buy or sell. It does not apply to timing

question

Simple Trust

answer

Income earned on the assets of the trust must be distributed during the year

question

Complex Trust

answer

income earned on the assets may accumulate

question

Remainderman

answer

the person who receives the remaining balance of the trust

question

Beneficiary

answer

a person who's property is held in the trust

question

Settlor

answer

person who supplies property to the trust

question

Trustee

answer

person who holds legal title to the property for the benefit of another person in the trust

question

Testamentary Trust

answer

the settlor retains control over the assets until he dies

question

Revocable Trust

answer

must be a living trust b/c the living grantor has the right to change the trust

question

Irrevocable trust

answer

the settlor must give up all ownership in property transferred into the trust

question

Partnership

answer

allows profits and losses to flow directly through to the investor. easy to start, easy to end.

question

LLC

answer

limited liability, and flow through of taxable earnings. owner's are not liable for debt

question

S Corp

answer

taxed like a partnership, offers limited liability, profits and losses are passed through to the shareholders, may not have more than 100 shareholders

question

C Corp

answer

separate entity from it's owners

question

Financial Profile

answer

Includes: current expenditures, debts, tax status, income sources, balance sheet, and liabilites

question

Preservation of capital

answer

investing in bank cds

question

Current Income

answer

fixed income investments and mutual funds

question

Growth

answer

stock investments

question

Speculation

answer

highly volatile stocks, junk bonds, options, commodity futures

question

Constant Ratio Plan

answer

investment plan that attempts to maintain 70/30 split of stocks to bonds, periodically it is rebalanced to bring it back to the desired ratio

question

Constant dollar plan

answer

investment plan to maintain a constant dollar amount in stocks and other investments depending on the plan

question

Strategic Asset allocation

answer

Spread investments among different asset classes for the long term

question

Tactical Asset allocation

answer

short term adjustments to investments of different asset classes

question

Active management

answer

management style where the manger is picking stocks based on market timing and the ability to outperform market indexes

question

Passive management

answer

no management style based on an index such as the s&p

question

Value Managers

answer

focus on undervalued whose earnings are comparable to the company's book value

question

small cap

answer

market cap less than 300 million

question

mid cap

answer

market cap between 300 million - 2 billion

question

large cap

answer

market cap above 2 billion

question

Dollar cost averaging

answer

invest consistent amounts of money in a mutual fund at a regular periodic intervals.

question

Inherited Securities cost basis

answer

when someone dies the cost basis steps up to the date of death value

question

Fundamental Analysis

answer

analysis that takes into consideration the financial statements and economic conditions

question

Technical analysis

answer

analysis that focuses on pricing and trading volume patterns and charts

question

Microeconomics

answer

type of economics that focues on small units of the economy

question

Macroeconomics

answer

type of economics that focuses on the economy as a whole

question

Monetary Policy

answer

refers to the central bank's actions on the quantity of money. controlled by the board of governors of the federal reserve

question

Fiscal Policy

answer

gov't's use of spending. controlled by the president through congress

question

Business Cycles

answer

expansion, peak, contraction, trough

question

Expansion

answer

business cycle, increasing business activity in sales, manufacturing, and wages

question

Peak

answer

business cycle, when economy cannot expand anymore

question

Contraction

answer

business cycle, when business activity declines

question

Trough

answer

business cycle, when business activity stops declining and levels off

question

Nominal rate of interest

answer

actual amount of interest a borrower pays for loanable funds

question

Real Rate of Interest

answer

the nominal rate of interest minus the expected rate of inflation

question

Federal Funds Rate

answer

the interest rate the banks of the fed reserve charge other banks on over night loans of a million dollars or more

question

CPI

answer

the measure of the general retail price level, compares the current cost of buying a basket of goods with the cost of buying the same basket of goods a year ago.

question

Leading Indicators

answer

economic indicators that tend to turn down before the beginning of a recession or turn up before an expansion

question

Coincident Indicators

answer

current indicators, change directly with the business cycles

question

Lagging Indicators

answer

indicators that change six months after the economy has begun a new trend

Series 65 – Kaplan – Flashcards

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