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Study Flashcards

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1
Q

Us government issues underwritten via

A

Competitive bid

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2
Q

Us agency securities are underwritten via

A

Negotiated offering

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3
Q

MSRB rules. The following records must be kept for specified time periods

A

Trade comparisons
Customer account statements
Customer complaints

Not official statements.. accessed in EMMA

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4
Q

Coincident economic indicator

A

Person income
Index of industrial production
Employment levels

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5
Q

Leading economic indicator:

A

M2
Unemployment
Stock prices
Durable goods orders

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6
Q

Lagging economic indicator: past

A

Corporate profits,
Consumer credit to income levels
Employment duration

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7
Q

CMOS quoted

A

Yield spread, like government bonds

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8
Q

RANs

A

Unfounded

Source of temporary financing

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9
Q

Funded debt=

A

Long term corporate bond issues

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10
Q

Bond buyer revdex

A

25.revenue bonds with 30 years to maturity, rated A or better

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11
Q

Variable rate notes

A

Also know as reset notes
Rate of interest that is reset periodically, usually weekly based upon a recognized interest rate index that usually consists of treasury issues

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12
Q

Adjustment bonds

A

Corporate bonds that are used in reorganization’s with interest payable only if the corporation hits a specified earnings target

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13
Q

VC funds

A

Venture capital fund

  • a private placement limited partnership open to ONLY wealthy investors that makes private equity investments in privately held start up companies
  • only available to wealthy accredited investors
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14
Q

BDCs

A

Business development company

  • a registered investment company that makes private equity investments in start up companies.
  • listed and trade in an exchange
  • available to the general public
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15
Q

Tax swap

A

Sell muni bond in which he has a capital loss and immediately reinvest the proceeds in another muni bond.

  • gives investor a tax deductible capital loss
  • muni purchase MUST be different that the one he sold at a loss, or it will be considered a wash sale

Maturity
Coupon rate
Issuer

2 of the 3 need to be different

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16
Q

Broadest measure if the market

A

Wiltshire index

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17
Q

Mutual funds must send their financial statements to shareholders

A

Semi annually

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18
Q

CDO

A

Collateralized debt obligation

  • structured product that invests in CMO tranches.
  • rated based in the credit quality of the underlying mortgages
  • have underlying mortgage collateral that is backed by the credit huskily if those mortgages
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19
Q

Flow of funds as revenues are collected where do they go first?

A

Revenue fund… and then applied in sequence

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20
Q

Mutual funds

A

Impose a front end sales load
8 1/2% max fee allowed by FINRA

Contingent deferred sales charge
-imposed when the customer redeems tbe fund, fee is lower because fund is held longer encouring investors to keep money in the fund over the long term

No load= money market funds

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21
Q

Corporate bonds are quoted

A

Term bonds and are quoted on a percentage of par basis in 1/8ths with us the same as a “dollar” quote

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22
Q

Term bonds quoted

A

Percentage of par

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23
Q

Non contributory defined benefit retirement plan

A

Contribution amounts vary
Annual benefit payments are fixed

Larger contributions are made for older plan participants nearing retirement than for younger plan participants who have many years left until retirement

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24
Q

Defined contribution defined benefit

A

Contribution amount fixed.

The benefit depends on the investment results on the fixed contributions made and can vary

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25
If market price and strike price at the same at expirations What positions will result in a loss
Long call Long straddle “At the money” contracts will expire unexercised, and holder loses the premium, while writer gains the premium
26
ETNs
Structured product offered by banks that gives a return tied to a benchmark index. Listed in a exchange and trade Not an equity security.. debt security Backed by faith and credit of issuing bank In interest or dividend payments Value grows as they are held based in the growth of the benchmark index with any gain at sale or redemption currently taxed at capital gains rates =tax advantages as compared to conventional debt instruments
27
Broker dealers must send what semi annually to its customers?
Balance sheet Subordinated loan amounts Net capital computation Do not need inventory amounts
28
Regulation M | tier 1, Tier 2, Tier 3
``` Tier 1 Daily trading volume of $1,000,000 Market float rate of $150,000,000 No restriction for trading prior to distribution Issue is too big for price manipulation ``` Tier 2 $100,000 $25,000,000 Restricted period is the business day prior to the effective date Tier 3 Any other security not meeting these minimums is a tier 3 restricted period of 5 business days prior to the effective date
29
Deflation
Over a period of 18 months, prices of good and services decrease by 2% and market interest rates decrease by 3%
30
Call covenants that MUST be considered when computing the dollar price of a muni bond quoted on a yield basis
In whole call ONLY
31
What agencies may issue securities
FHLMC (federal home loan mortgage Corp) FHLB(federal home loan bank) TVA (Tennessee valley authority)
32
Highest investment grade rating
AAA
33
Lowest investment grade rating
BBB
34
Rule 144A
A QIB is an institutional investor with at least $100,000,000 of assets available for investment. Individuals no matter how wealth are NOT QIBs! *Permits the issuers to sell minimum $500,000 blocks of private placement securities to QIBs without SEC registration Traded from QIB-QIB through PORTAL-only for 144A issues (Qualified institutional buyer)
35
OATS=
Order audit trail system * records of orders are require for all us equities markets. NYSE, AMEX, NASDAQ, OTCBB, OTC NOT for CBOE... options.
36
Regulation SHO
Mandatory buy in provision Require and up tick or up bid is rescinded Prohibits naked short selling and requires exchanges to maintain a threshold list of hard to barrow securities. If a threshold list security is sold short and the security is not delivered in settlement the rule requires that the security be bought in after 13 consecutive settlement days have elapsed from trade date
37
Difference between open end management company and closed ended management company
Capitalization Open end funds continuously issue and redeem shares Closed end funds have a one time stock issuance and the fund is closed to new investments
38
Stock power
Legal transfer document
39
Defense interval ratio measured:
Liquidity
40
Market risk
Risk of rising interest rates forcing the price of the bond to drop. Longer maturities drop the fastest
41
Recourse
Added to basis since the partner is personally at risk for this
42
ETF
Exchange traded funds Trade like any other stock Bought and sold at the prevailing market price plus commission Can be bought in margin and can be sold short
43
Accounts receivable turnover ratio
Annual net sales\year end accounts receivable
44
Primary purchasers of treasury securities
Investment companies Broker dealers Commercial banks *not federal reserve banks
45
Fed funds rate
Average rate of member banks throughout the United States Daily rate charged by member banks for overnight loans of reserves
46
Dividend payout ratio
Common dividends/earnings for common First must deduct the preferred dividend from the net income for the earnings for common.
47
An offer of IPO shares made to an officer of a publicly held company: “Spinning”
Prohibited if the purpose of the offer is to get investment banks business from that company
48
Accretion of bond discount
Increases reported interest income each year Increases the bonds cost basis each year
49
Insiders:
Cannot sell their stock short (except to short against the box at year end to lock in a gain) Forfeit any short swing profits (profit made in less than 6 months of holding the shares) Reported within 2 business days of the trade to the SEC
50
High put\call ratio=
Oversold market Market is ready to move higher More puts than calls
51
Low put\call ratio
Overbought market Market is ready to move lower More calls than ours
52
Churning:
Excessive trading in a customers account. RR has to have a reasonable basis for believing that a series of recommended transactions, even if suitable when viewed in isolation are not excessive and unsuitable for the customer when take together Quantitative suitability
53
What is not defined as a security?
Fixed annuity *element of risk not included
54
Non qualified deferred compensation plans
Employees have limited claim to plan benefits if the business fails Benefits payable to employees at retirement are taxable Board members are not elegy me for these plans, as they are not considered employees No IRS approval May be discriminatory and offered only to certain employees such as key executives.
55
Selling a mutual fund shares immediately below the dollar amount stated in the prospectus that would qualify an investor to receive a reduced sales charge is called
Breakpoint sale
56
Variable rate municipal bonds investments main advantage is?
*It’s price should remain relatively stable No fixed coupon rate Coupon is tired to a market rate As interest rates rise the coupon is adjusted upward, as rates fall, the coupon is adjusted downward (same direction)
57
ADRs (American depositary receipts)
issued by large domestic commercial banks | facilitate U.S. trading/investors who want to trade in foreign securities
58
Gonna Mae Freddie Mac Fannie Mae
Mortgage
59
FCS (farm credit system)
National network of lending institutions that provides agricultural financing and credit. Issues discount notes, floating rate bonds, and fixed rate bonds, Maturity: 1-30 years Not pass through investments Issue short term notes and long term bonds Proceeds are used to make loans to farmers Interest is tax exempt at the state and local level Federal tax Indirect obligations of the US gov. Not directly backed
60
Index option cash settlement occurs
Next business day after option is exercised
61
Unrealized appreciation | Realized appreciation
???
62
What securities are typically sold with a legal opinion attached?
Municipal bonds
63
Legal opinion
Supplied by bond counsel States that the municipal bond is legal and binding on the issuer, if tax exempt that opinion is stated as well Exclusive to municipal securities
64
Tran Tan Ban
Short term funding used by municipalities.
65
What action would cause the SMA to increase
The market value of SHORT securities decreasing *not long decreasing
66
Net revenue pledge. What is the first item that gets paid from the revenue received?
Operations and maintenance fund
67
Advantage of an oil and gas INCOME program, compared to other types of oil and gas programs
Lowest risk of capital Income Exploratory ??
68
Covered call
... Long shares, long call
69
Covered put
Short shares, long put guess
70
Income strategies
??
71
Hedging strategies
??
72
stable market for options
Short spread
73
Volatile market for options
?? Long spread
74
What does DRP stand for
Disclosure reporting page
75
Primary distribution
When an existing, publicly traded corporation issued a large block of NEW shares to expand. Not an IPO because it’s not the first time, but still a primary distinctions becuase they are new shares
76
IPO restricted persons
Spouses, parents, children, siblings and in laws, a person supported by the employee Aunts, uncles, grandparents are excluded
77
Zero coupon bonds
Purchased at discount mature at par Pay no interest Receive more capital than invested=capital accumulation. Avoid reinvestment risk Not taxed deferred Unless municipal there is phantom income= income not currently received but currently taxable
78
Target date fund:
For a change who wants to put money into an investment that can be left alone for a period of time until expected retirement.
79
Forms of business that allow for pass through of income and losses
Née constructions real estate direct participation programs Oil and gas drilling DPP S corporations
80
Churning
Trading that is excessive in frequency or size and does not serve and investment purpose.
81
Capping
Form of market manipulation that attempts to hold the price of the security down
Fidelity
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