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10 Cards in this Set

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FAQS ON AIR
Any time the actual rate of return of a variable annuity’s separate account is the same as the AIR, the check will be the same as the previous month’s check.
ELIGIBLE PEOPLE FOR 403B'S
403b plans are sometimes known as TSAs (Tax-Sheltered Annuities). The eligibility for these plans is generally limited to employees of public school systems and employees of non-profit organizations (501(c) 3 entities). The U.S. Navy teacher would not be eligible.
When a corporation chooses to refund some of its outstanding debt, it issues new bonds with a lower coupon rate to raise the funds to call older bonds with higher coupon rates. Once the necessary funds have been raised, the older bonds will be called according to the terms of the bond’s Trust Indenture. What information would investors receive in the call? I. The bond’s call price II. The call date for the bonds III. The yield-to-maturity of the old bonds IV. The coupon rate of the new bonds
I, II
When a corporation chooses to call outstanding bonds, it will inform the bondholders of the call date and call price. Some bonds pay an amount slightly above par on called bonds, especially in the earlier years. The notice of call will not include the yield-to-maturity, because the bonds will never mature. The coupon rate of the new bonds is irrelevant.
If a registered representative has determined that the portfolio of her client should be structured by defensive investment strategies, which of the following is least likely to be a part of the portfolio?
Stocks of high-tech genetic research companies
Defensive portfolios are designed to perform well, or in a stable manner, in all economic conditions. Utilities stocks, investment-grade bonds, and tobacco company stocks fit the bill here. Gene research company stock might fit well in an aggressive growth stock portfolio, but not a defensive portfolio.
A registered representative has a client, Alex, who is in the 28% tax bracket. He has located corporate bonds with a coupon rate of 5% that are in line with Alex’s stated objectives and risk profile. If he finds municipal bonds with similar characteristics, what would their coupon rate have to be to give Alex a tax-free equivalent income?
In this scenario, we are given the corporate (taxable) coupon rate. To find the municipal (tax-free) equivalent, we multiply the corporate coupon rate by the product of 100% - Tax Bracket%. 5 × (1.00 - .28) = 5 × .72 = 3.6%.
Which of the following are characteristics of the “fourth market”?
A negotiated market
An institutional market
A market that uses the INSTINET
The fourth market is a marketplace for direct trading between institutions such as investment companies and pension funds, among others. The trades are made directly between the participants and do not go through a broker-dealer--to avoid commissions. The reporting mechanism for the fourth market is Instinet, short for the Institutional Networks Corporation. Any transaction in securities that takes place away from an exchange is an OTC transaction.
When stock is listed on an exchange, what is the nature of trading in the stock that takes place on the exchange floor?
Trading on the floor of exchanges is only for those securities that are “listed” on that exchange. It is a physical marketplace where broker-dealers send their representatives to present customer orders to a trading crowd by “open outcry,” in the form of an auction. The exchange is considered to be the only auction market
If a registered representative sees a corporate bond certificate that is described as a “refunding mortgage bond,” what is the nature and purpose of the bond?
The purpose of a refunding bond issue is to pay off old, high interest rate debt. This is much like an individual refinancing a home mortgage loan when interest rates drop. A mortgage bond’s collateral is real estate owned by the company. A debenture has no collateral
In the payment of corporate dividends, what role in the process is played by the record date?
The record date is that date in the process by which a person must be a shareholder of record as shown by the corporation’s books. It is a cut-off date for those entitled to receive the declared dividend
RULES FOR NASD ADVERTISING
Press releases, research reports, generic ads and municipal bond offerings are excluded from the requirements for filing with the NASD under the advertising and sales literature rules. The announcement of a specific fund, such as in choice IV, would require filing.