An individual that believes they can profit from examining historical trading volumes (AKA ________________ analysis), does NOT believe in any form of _______________ Market Hypothesis.
Technical Analysis, Efficient Market Hypothesis.
In general, Efficient Market Hypothesis believes that all available information is already ______________ in a stock’s price.
Reflected
The semistrong form asserts that all technical analysis data and all other _____________ available information on the company, such as earnings reports, is ______________ in a stocks price.
Publicly, Reflected
The _______ form of the EMH asserts that a stocks price already reflects all information related to _______________ analysis, though ______________ analysis can still be useful.
Weak, Technical analysis, Fundamental analysis.
The _________ form asserts that all historical data and company information - publicly available and privately known only to ______________ is reflected in a stocks price.
Strong, Insiders.
It is ____________ for an investment advisor to lend money to a client, there are exceptions, one of which is that the client is _____________ with the investment adviser; employment is affiliation.
Prohibited, Affiliated.
The other exception to the lending rule would be if the IA is in the business of lending money as part of his business.
If a Canadian firm does not have an office in the states, and a Canadian client is temporarily in the states, the broker-dealer would need a _____________ registration in order to continue doing business with the client while in the states.
Limited Registration.
It is a very difficult process but worth it for a large client.
NASAA Model Rules define ______________ business practices to include, among other things, “providing a report… to any advisory client prepared by someone other than the adviser without disclosing that fact.”
Unethical
A ____________ _____________ relations order is a court judgment, decree, or order for a retirement plan to pay all or part of a retirement allocation to a spouse.
A qualified domestic relations order (QDRO)
The receiver of the benefits is taxed at his own rate, not that of the original plan participant.
An IA is obligated to try to get “best execution” on securities transactions for clients.
IA should consider:
Total cost, quality, execution capability, commission rate, financial responsibility, responsiveness to the adviser (not the client), and the value of any research services (soft dollar) provided.
Offer of rescission includes a ___________ of the original investment, along with a reasonable rate of interest, minus any income gained on the investment.
Return
Opportunity cost is never part of an offer of rescission.
Mutual funds with no sales charge can be called “___-______” only if they have 12b-1 fees of up to .25% of net assets.
No-Load
Investment advisors must disclose all breakpoints or ways that clients may reduce their sales charges. The qualifications of the fund managers are not necessary.
___________ persons involve employees, directors, officers, and fiduciaries with “access” to inside information about securities gained from working with or for an investment advisor. Such persons must report their securities holdings to the chief compliance officer within _______ days of gaining that access and then again at least annually.
Access Persons
10 days
If an investment advisor accepts $________ of prepaid advisory fees (or more) within the upcoming _______ months (or less), then the adviser is considered to have taken custody of client funds under NASAA’s interpretation.
$500
6 Months
The discounted cash flow (DCF) analysis is a valuation method based on the notion that the _________ of a company (and its stock price) can be calculated by summing the __________ value of its projected free cash flows.
Value
Present Value
DCF calculates the company’s projected cash flows.
Broker transactions, or transactions in which a firm helps to broker a deal between a buyer and a seller, are also known as ____________ transactions. They take place in the ____________ market, with the profits going to the investor who is selling the securities and not the issuer.
Agency transactions
Secondary Market
When a firm buys securities from a client or sells securities to a client from its own account, it is acting as a dealer and serving as _____________ to the trade. They are also __________ market transactions.
Principal to the trade.
Secondary Market transactions
Which of the following are considered when evaluating a customer’s tax status?
Age
Citizenship
Total earnings as of the last day of the tax period
Residency
Age, total earnings, and residency.
A TIPS is a Treasury Inflation Protection Security. The ____________ is adjusted upward by the ______________ rate each year, and at maturity, the holder receives the inflated principal amount.
Principal
Inflation Rate
$1000 inflated by 2.50% annually equals $1000 x 1.025 x 1.025 x 1.025 x 1.025 x 1,025 =$1,131
On a 5 year maturity
$1000 x 2.50% = 1025 $1000 x 1.025 = 1025
The Internal Rate of Return is the true yield maturity of an investment. The IRR of an investment assumes that cash flows generated by the investment are ______________ at the __________ rate of return.
Reinvested
Internal
A 15% ____________ deviation means that the investment return can vary _______ or ________ 15%.
Standard deviation
Plus or minus
The Standard and Poor’s 500 Index is based on the market _____________ of the 500 largest companies headquartered in the United States.
Capitalization
It is a large-cap index.
_________ literature is defined as a communication that goes to a __________ audience, including market and research reports, form letters that re not broadly distributed, password-protected websites.
Sales literature
Specific Audience
The difference between advertising and sales literature is how broad the intended audience is.
The RRR (Required Rate of Return) is the ___________ return that an investment must offer in order for someone to decide to buy it. A trader would buy a security if the expected rate of return was ___________ than the required rate of return.
Minimum return
Greater
