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63 Cards in this Set
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- Back
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Regulation A
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small issue exemption (from filing with the SEC.
New issues raising less than 5 million during a 12 month period |
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Regulation D
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private placement (exempt from registering from SEC)
sold to no more than 35 non-accredited investors |
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accredited investor
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Amy investor with a net worth of at least 1 million dollars or has earned st least $200,000 for the past 2 years
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current yield
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annual yield (annual dividend) / current market price (watch and take into account annual and quarterly)
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par value of preferred stock
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$100. unless stated otherwise
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Callable Preferred stock
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can be retired (called by the issuer).
when interest rates go down. |
6 % Interest rate preferred and interest rates go down to 2%, the corporation doesn't want to pay 6% anymore they can call back the stock
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what stock can be purchased for possible hedge protection against inflation
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adjustable rate preferred stock
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Options
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buyer - purchaser, holder, long, pays premium, controls the option.
seller - writer, short, receives premium has obligation |
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Bullish
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buy a call,
sell a put |
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Bearish
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buy put
sell call |
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Par value of bonds
face amount principle amount maturity value |
$1000. par value unless otherwise stated
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Interest Rate Of Bonds
Nominal Yield Stated Rate Coupon Rate |
% of par paid semi annually
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Nominal Yield
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Interest Rate
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Yield to Maturity
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YTM = interest Rate + discount - premium
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Bond Prices
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Inverse relationship to interest rates
(interest rates go up, bond prices go down) anytime a bond trades lower than its par value that's a discount bond) |
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Bond Prices
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points and fractions of points which is percent of par.
each point is worth $10 example: 94 1/4 points is 942.50 a discount |
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Liquidation Priority
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Wages
taxes secured bonds debentures and creditors subordinate debentures preferred stock common stock |
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T Bills
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less than a year to maturity ( 4, 13, 26, & 52 weeks)
issued at a discount Interest paid at maturity |
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T Notes
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issued 2-10 yrs
issued at par Interest paid semi-annually |
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T Bonds
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issued more than 10 yrs
issued at par Interest paid semi annually |
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Trade date
(execution date) |
Date the order is filed.
the customer becomes economically responsible |
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Settlement Date
(completion date or confirmation date) |
when the customer pays
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Regular way
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TD + 3 business days (trade date + 3 days)
TD+ 1 business day for direct obligations (government) and options |
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Reg T
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TD + 5 business days. (regular way plus 2 days)
regulated by the FRB credit extended to customers by broker/dealer 50% must be deposited therefore only 50% can be borrowed allows broker/dealer can request am extension from FINRA, exchange, FRB |
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Money Market Securities
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commercial paper
banker's acceptance negotiable CDs TBills |
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The Securities Act of 1933
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Paper act
Act of Full Disclosure (all material facts) The prospectus act regulates new issue (primary offerings) Requires new issues be registered with the federal government designed to prevent fraud |
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1933 Exempt From Registration
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Municipals
Government (T bill, T note, T bonds) BA (bankers acceptance) max maturity under 270 days Commercial Paper (max 270 days) Private placement (under regulation F) |
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Security Exchange Act Of 1934
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People Act
Created the SEC Requires registration of secondary markets Requires broker/dealers and representatives to be registered |
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Statutory Disqualification from registering under Security Exchange Act Of 1934
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Convicted of a felony within 10yrs
Convicted of securities crime within 10yrs willfully violated Federal Securities Act Expelled or suspended by SRO subject to order denying, suspending or revoking registration |
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Securities Investor Protection Act of 1970
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Protects customers if broker/dealer fails
Created SIPC (securities investor protection corporation) |
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SIPC
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Provides coverage per separate customer (not account)
500,000 coverage (securities and cash) no more than 250,000 in cash |
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Insider Trading and Securities Fraud Act of 1988
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Insider information
The tipper and the tippee both guilty |
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Penalties from inside trading enforcement act of 1988
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Civil - fine up you $1million or 300% (treble damages) profit made or loss avoided
Criminal - up to 20yrs in prison |
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OTC- Over the Counter
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Electronic Market
Unlisted securities Trade (most are unlisted) Negotiated market Market maker (dealer) NASDAQ Third market fourth market |
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Bid Price
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Customer sells at the bid price
market maker pays the bid price |
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Ask Price
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Customer buys at the ask price
The market maker is going to sell the ask price |
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Cost Basis
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After tax dollars that have been invested
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unrealized capital gain taxable?
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no
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Realized capital gain taxable?
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yes
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Wash Sale
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IRS disallows A loss if the same or substantially identical security are purchased within 30 days of a sale that results in a loss
based on trade date snd results in a 61 day period |
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Cost Basis Of Shares Transfered
Inherited |
inherited - fair market value on date of death
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Cost Basis Of Shares Transferred Gifted
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Donor's original cost basis
gift tax limit applies gift limit 13,000 as single tax payer gift limit 26,000 as a married couple limit are per person gift given to |
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Types of Non-qualified Plans
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Deferred compensation
457 plans |
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Qualified Plans
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Keogh/HR-10
SIMPLE Defined Benefit Plan Defined Contribution Plan |
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Defined Contribution Plan
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Money Purchase Plan
401(k) Profit sharing Plan 403(b) tax shelter annuity or account (TSA) |
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Educational Accounts
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Coverdell Educational Savings Account (ESA)
Section 529 plans |
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Qualified Plans
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Business Sponsored Retirement Plans
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Defined Benefit Plan
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Retirement benefits are known.
Employee knows how much of their income they will get contribution from employer is unknown |
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RMD
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Required Mandatory Distributions
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Defined Contribution Plan
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contribution plan known to employer
The employee does not know how much they will be played when they retire |
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Types of Qualified contribution
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Money purchase
401(k) Profit Sharing 403(b) TSA - Tax Sheltered Annuity |
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403 (b)
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Tax Sheltered Annuity (TSA)
employees of public school systems employees for private not for profit employee and employer contribute |
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ERISA
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Employee Retirement Income Securing Act
federal law that governs qualified retirement plans Establishes eligibility, funding, reporting, beneficiary, fiduciary responsibility, vesting requirements |
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Coverdell ESA
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Maximum 2000 per person per year until age 18
Income limits apply Anyone can contribute Money grows tax free must be used by age 30 used for preschool and beyond can be transferred to another family member |
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Section 529 plans
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Educational Accounts
State sponsored Contributions vary state to state Combine 5yrs of gifts and pay no gift tax No age limit Post secondary only Transferred to another family member Contributions not federal deductible but possible state deduction |
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Credit Risk
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Default risk - risk the issuer off the bond will not pay
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Business Risk
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Also known as capitals risk
The Risk that if you invest in a company, something may happen to the company |
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Market Risk
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Beta on stock (measure of volatility)
Interest Rate On bonds (interest rate goes up, bond prices go down) |
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Systematic Vs Non-systematic Risk
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Systematic is tendency of offices moving together (market risk)
Non-systematic involves underlying investment (business risk, the specific company |
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FINRA Rule 5130
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Prohibit Restricted Persons from buying IPO
does not apply to subsequent new issue |
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What is not Discretionary
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time and price are not discretion
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RR Must have Discretionary authority for
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Action (buy/sell)
Amount Asset |
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Expense Ratio
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fund expenses / average meet assets = expense ratio
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