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100 Cards in this Set
- Front
- Back
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What are attributes of a opened end company
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Mutual funds, sales charge( P=NAV+sales charge), no secondary market, sold and redeemed by fund only, may purchase fractional shares, ex date is set by the Board of Directors ,
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What are attributes of a closed end company
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Secondary market, price is set by supply and demand, issues a fixed number of shares can issue common, preferred, and bond,
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What are some investment characteristics does an open end company
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Professional management, the Act of 1940, must be diversified =75-5-10 rule,
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what is the 75-5-10 rule,
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75 percent of total assets must be invested in securities issued by companies other than the investment company or its affiliates, no more than 5% of the funds total assets are invested in the securities of one issuer and the fund does not own more than 10% of the outstanding voting securities of any one issuer
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What are some advantages of ETF
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Price and ease of trading because they can be bought and sold any time during the trading day, margin-- they can be bought and sold short, operating costs are lower than mutual funds, tax efficiency-they do not distribute capital gains, there are no tax consequences until investors sell their shares
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What are attributes of unit investment trusts
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No boards of directors, employee investment advisors, or actively manage their own portfolio. NOT traded in the secondary market. UITs function as a holding company for its investors. They purchase other investment company shares or government bonds. They issue redeemable shares known as units for shares of beneficial interest. It may be fixed (bonds)or non fixed.
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Because of the more stringent suitability requirements for limited partnership, direct participation program, purchasers are generally required to provide
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A statement of net worth
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What are some advantages for investing in variable annuity
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Tax deferred growth, guaranteed death benefit(CV or basis), life time income, 1035 transfers, no age 70 1/2 restrictions, diverse subsaccount selection, no probate
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unlike a traditional fixed annuity, indexed annuity credits interest to the owners using a formula based on the performance of an index. If the index does well, the annuitant is credited with
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A specified percentage of the growth of the index typically 80-90%. Also called the participant rate
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What is the minimum of cash value that must be available for an insurance policy loan
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75%. It must be paid back with interest in order to restore policy values
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What is the minimum amount of time that a variable life insurance policy owner has to exchange the contract for a form of permanent insurance issued by the company
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24 months federal law. Without medical underwriting and the new policy is issued as if everything were retroactive
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Maximum sales charge allowed over life of a variable life policy is
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9%. in 2011 computed over a 20 year period
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WL, vli and ul insurance policies all have
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Policy loans
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What is available in WL, that is NOT available in vli and ul insurance policies
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guaranteed cv
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both WL, vli (aka fixed premium)insurance policies have
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stated premium and a guaranteed death benefit
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What is unique to a variable life insurance policy
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Minimum guaranteed death benefit plus variable death benefit. VLI is the most expensive type of cash value insurance because it allows you to allocate a portion of your premium to a separate account comprised of investment funds in the policy.
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What are the deductions from the gross premium
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SAS = Sales load, one-time Administration fee, and State premium tax, if any
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Charges deducted from the separate account include
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Mortality risk fee (cost of insurance), expense risk fee, Investment Management fee
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An obligation to buy stock at the strike price this exercise is called
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Short put. Required investor to buy at a price reduced by the amount premium received, if exercised
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What are forward contracts and what are some of their attributes
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Direct obligation between a specific buyer and seller. They are non standardized, illiquid, no secondary market, credit and trustworthiness of seller risk
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5 components of a typical forward contract
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TQQPP. Quantity and quality of commodity, time place and price of delivery
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What are futures contracts
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Exchange traded obligations for commodity regulated by CFTC
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Future contract details, including delivery month, Trading Limit, grades, and locations are determined by
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The Exchange where the futures contract is traded
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Fill or kill
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Execute immediately in entirety or cancel
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All or none
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Execute in its entirety but not necessarily immediately
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immediate or cancel
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Execute as much as possible immediately, cancel the rest
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In an annuity when the unit refund annuity option is chosen, the insurer pays the annuitant a minimum number of payment, and at death
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If the annuitant dies prior to receiving an amount that is equal to their account value, the survivor receives the balance of the account in a lump sum
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AIR, assumed interest rate, effects are different in variable life insurance versus a variable annuity. How so
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It affects the death benefit in variable life insurance. It affects the payout in a variable annuity
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A member of the New York Stock Exchange who executes orders for other members and also acts as a market maker charged with keeping an orderly market in designated stocks is called
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A specialist
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When selling a security to a public customer, the BD has his mark up to the
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Ask / offer price. The mark up does not have to be disclosed on a client confirmation (unlike commissions).
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A not held order
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Allows the floor broker to use his judgment as to price and timing of the transaction
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Universal variable life policy should be purchased primarily for
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The insurance benefits they offer rather than as an investment
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Hedge funds are issued by
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Limited partnerships
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When a mutual fund has net redemptions the expense ratio
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Increases. As the number of outstanding shares is reduced, the fund's fixed expenses are borne by fewer shares
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For an indexed annuity using the annual reset index method, interest is determined each year by
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Comparing the index value at the end of the contract year with the index value at the start the contract year
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For an indexed annuity using the high water mark, how is the interest is decided
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interest is determined each year by by looking at the index value at various points during the defined term, the interest is based on the difference between the highest index value and the index value at the start of the term
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For an indexed annuity using the point to point method, how is the interest is decided
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Interest is based on the difference between the index value at the end of the term and the index value at the start of the term
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in downtime real estate both residential and commercial usually
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Under performs
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Are reit professionally managed
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Yes
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Special tax treatment under subchapter m of the Internal Revenue Code is available for REITs if
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A REIT distributes at least 90% of its taxable income
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Wages earned by employees during 6 months prior to bankruptcy receive
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Higher priority then secured claims
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The 5 percent markup policy regulates
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Commission only
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Stock prices In the over-the-counter market are determined by
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Negotiation
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Forward contracts has no
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Secondary market
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How do you compute the final semi annual interest check on a tips bonds
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Because the principal increases with the inflation rate first determine inflation adjusted par by adjusting inflation rate by #of times interest paid per year (usually 2). change # of periods to reflect # of interest payments. Next determine interest by applying Appropriate (semiannual) coupon to inflation adjusted principal
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During bankruptcy what is the liquidation order
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Wages, taxes secured debt holders, unsecured debt holders, subordinated bonds, preferred stock, common stock
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What US government security does not bear a stated interest rate but is sold at a discount through weekly auctions
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Treasury bills. Treasury bonds, and tips all carry stated interest rates
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What is the real rate return ( inflation adjusted return) of for tips bond
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It is always the coupon rate because tips adjust the principal value with each 6 months to account for the inflation rate
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When must The death benefit of a variable life policy, the cash value and the asset value be calculated
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The death benefit must be calculated annually and the cash value calculated monthly. Asset values are computed daily
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What are the primary risks of forward contracts
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Illiquidity because no standardization of contracts. Also credit worthiness of the buyer because there is no entity backing up the contract
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What is a difference between a universal life insurance policy and a schedule premium variable life insurance policy
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There is a minimum guaranteed death benefit in the schedule premium variable life while no guaranteed death benefit in the universal life policy
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What is unique about universal life policy, also called flexible premium life
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It is the only insurance where the policy owner is permitted to pay in an amount in excess of the stated premiums
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In a variable life insurance policy, a minimum death benefit is
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Guaranteed . But no cash value
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Why our country funds usually closed end investment management companies
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Because it is often difficult to liquidate the foreign securities to get their value into the u.s
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Unit holders of a variable annuity vote on the basis of the number of units they own. Holders of variable life insurance receive one vote for each $100 of
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Cash value
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With variable life insurance, air applies only to
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The death benefit
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What are the characteristics of jumbo CD
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Negotiable, issued for 100,000 to $1 million, secondary market, short-term maturities, at Par ( like all CDs)
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What are some attributes of hedge funds
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accredited investors, high liquidity risk due to lock up provision, ability to sell short, and adopt risky arbitrage strategies, private and unregistered investment pool
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A securities exchange market is different than OTC in that
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It is auction market. OTC market direct negotiation
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The rate at which the cash flows are generated in a mortgage for that pass through security is determined by
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The rate at which the mortgages mature
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Withdrawals on nonqualified annuities due to death, disability, or substantially equal annuity distribution over life can be made before age 59 1/2 without
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Being subject to a 10% penalty
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A client has seen the value of the aggressive growth fund in the earth portfolio fall by over 70%. Which what action might be appropriate for her IAR
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Switch to a more conservative fund in the same family
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What is the death benefit provision of a variable annuity
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The principal amount at death is the greater of the total premium or the current market value
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How is commercial paper issued
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At a discount
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In terms of credit risk, debentures have an advantage over any corporate zero coupon because
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Interest payments begin within 6 months
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What is a regulated investment company
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Investment company may qualify as a regulated investment company by distributing 90% of net investment income, multiplicity of investment objective available
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Investment delivery is due on futures contracts at a predetermined date in
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The future at which point the commodity is delivered and paid at the predetermined price
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What are these differences and similarities between options and futures contracts
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Both options and futures contracts are regulated, standardized, exchange traded contracts and can be closed by making an off siding setting trade. listed option can expire but Future contract cannot
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The premiums paid for either variable life policies or variable annuity contracts are invested in a
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Separate account. In contrast the insurance company's general account of investments collects the premiums paid for traditional insurance policies and fixed annuities
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Real estate is not a
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security
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All of the expenses associated with a mutual fund an index fund manager that is attempting to match the performance of a designated index must actually do
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Better than the index to cover these expenses
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There is no incentive for the breaker to turn when the contract or the account is
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Fee only
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A stock has found its equilibrium price when the spread between bid and ask is non existent and active training is taking place. What is the effect the commision cost
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Commissions would tend to fall
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Trust our legal entities that are taxed under the IRC, thus they have their own tax
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Identification numbers
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There is no perspective requirement for
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Exempt securities
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Futures contract can be purchased
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Margin. Futures markets are not subject to regulation T and have their own margin requirements which are low
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The goal of IAR of an estate is to maximize investment return using a time horizon 9 months because
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9 months after the date of death is state taxes are due. Assets are valued at market value as of date of death
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In a bond nominal yield is
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Coupon rate or stated
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In periods of deflation interest rates, real estate, gold prices and stock prices
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Decline
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Some of the similarities of limited partnership and corporation regarding liability and management are
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Limited liability, centralized management
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Its fine managers often invest
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A large chunk of their personal wealth in the fund
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How are micro cap, small cap, mid cap and large cat define
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small cap. $300 million to $2 billion
mid cap. $2 to $10 billion big cap. $10+ billion mega cap. $200+ billion micro. $50-300 million nano. under $50 million |
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Section 529 plan refunds are not taxable if due to
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Death or disability of the beneficiary, or because the beneficiary received a scholarship
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Under the investment advisors act of 1940, anyone who gives advice about securities only two insurance companies is
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Exempt from registration
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Premium for term life, whole life, and universal life are deposited to the insurance company general account. The death benefit is fixed based upon
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Premium contribution and is not subject to investment risk
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What is required on an order ticket
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1. Whether solicited 2. Amount of commission
The Customer details and price are on the confirmation and if order flow payment made |
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What is the lowest investment grade bond rating
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BBB
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when would the ask price be lower than the net asset valon a closed in investment company
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Sellers exceed buyers
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Investment company must send their financial statements to shareholders
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Semi annually
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What are the four pieces of information that must be collected to open a new account
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Mean, address, birth date, social security number-- the information needed to verify a customer's identity. Telephone number is not needed
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Variable annuities will almost always out perform
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Equity indexed annuities
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For UGMA accounts and 529 who is the owner
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The child
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The real rate of return on investment is annual income divided by purchase price. It does not include
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Capital gain. Total return includes capital gain
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Both actions and futures
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Regulated standardized and exchange traded. Only forward contract our custom contract
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What are the permitted investments in a 403 B
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TIAA-CREF
Life insurance, annuities, and mutual funds. Direct investment in stock or CDs are not allowed. The investment must be managed by a professional |
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Any deposits or withdrawals made in cash, not checks, in an amount over $10K must reported to
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FinTax the adviser must file A cTR,cash transaction report with 15 days
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The procedure to open a new account is to have the manager of approve the opening of the account prior to the first trade. It is prohibited for the agent to execute the trade
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Before the manager approves the account opening
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529 rollovers are permitted every 12 months without a tax penalty and can be made to
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Another state program
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An IRA left to a beneficiary must be distributed based on the life of the designated beneficiary with the
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Shortest life expectancy. Or alternatively over a five-year period
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What is the primary risk with municipal bond
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Legislative
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