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169 Cards in this Set
- Front
- Back
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The ERW Corporation convertible bond has a conversion price of $50 per share. The conversion ratio is: |
c. 20.0 to 1
Par Value/conv px = Conv Px or #of shares Mkt px/shares = parity px of stk |
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Assuming investments of similar quality and coupons, which would be most appropriate for an investor who is anticipating a decline in interest rates over the next 15 years?
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Noncallable 15-year bonds and 30-year bond putable in 15 years.
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Which two of the following would occur when interest rates change? Bond prices
I. Decline when interest rates decline II. Rise when interest rates decline III. Decline when interest rates rise IV. Rise when interest rates rise |
RISE when interest rates DECLINE and DECLINE when interest rates RISE. In a normal market, bond prices move in the OPPOSITE direction of interest rates.
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________have a LOW CORRELATION to other financial assets owned by investors because real investments react differently than stocks and bonds.
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REITS
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REITS must be registered with the ___________ if publicly sold.
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SEC
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________ is paid on BONDS.
1. Dividends 2. Warrants 3. DRIP 4. Interest |
4. Interest
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Common Shareholders do NOT have:
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1. An ENTITLEMENT to receive DIVIDENDS
2. Right to DEMAND or VOTE on the dissolution of a COMPANY 3. Vote for Officers or Senior Management |
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_______________Never accrue INTEREST and does not pay SEMI-ANNUAL.
1. Shares of Common Stock 2. Zero Coupon Bonds 3. Shares of Municipal Common Stock |
2. Zero Coupon Bonds
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Bond YIELDS are based on all of the following EXCEPT:
1. Dividend Reinvestment Plan 2. Interest Payments 3. Purchase Price 4. Redemption Value of the Bond |
1. Dividend Reinvestment Plan
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A BASIS point on a BOND is EQUAL to 1/100th of a point or ____% if the $1,000 par value.
1. 1.0% 2. 10% 3. 0.01% 4. None of the above |
3. 0.01%
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DPS means?
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Dividend Per Share
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Preferred Stock pays a dividend stated as ____________ or in a ________________.
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%PERCENT of PAR VALUE (Safe to Assume $100) or in a fixed dollar amount.
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A PUT WRITER would be COVERED by:
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CASH equal to the STRIKE PRICE multiplied by 100 SHARES.
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A ______________ STRADDLE or COMBO is PROFITABLE if the market price moved:
1. LONG; Above UPSIDE Break-Even and Below DOWNSIDE Break-Even 2. SHORT; Above Break-Even and Above Down-Side. 3. Both 1 & 2 |
LONG; Above UPSIDE Break-Even and Below DOWNSIDE Break-Even
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A BASIS point on a BOND is EQUAL to 1/100th of a point or ____% if the $1,000 par value.
1. 1.0% 2. 10% 3. 0.01% 4. None of the above |
3. 0.01%
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DPS means?
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Dividend Per Share
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Preferred Stock pays a dividend stated as ____________ or in a ________________.
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%PERCENT of PAR VALUE (Safe to Assume $100) or in a fixed dollar amount.
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A PUT WRITER would be COVERED by:
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CASH equal to the STRIKE PRICE multiplied by 100 SHARES.
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A ______________ STRADDLE or COMBO is PROFITABLE if the market price moved:
1. LONG; Above UPSIDE Break-Even and Below DOWNSIDE Break-Even 2. SHORT; Above Break-Even and Above Down-Side. 3. Both 1 & 2 |
LONG; Above UPSIDE Break-Even and Below DOWNSIDE Break-Even
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Under a NET REVENUE PLEDGE, funds would be applied in the following SEQUENCE: (Memory Hook - O. B.s are D. R. S.
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O & M Funds
Bond Service Accounts for Principal/Interest Debt Service Reserve Fund/Sinking Fund Reserve Maint Fund/Renewal & Replacement (Depreciation) Fund Surplus Fund/General Fund of the Municipality |
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When you BUY a BOND, you are lending MONEY to: ___________
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An organization such as:
1. Public Corporation 2. Federal Government 3. Municipality |
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The three BASIC categories of BONDS are:
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1. Corporate
2. Government 3. Municipal |
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As INTEREST RATES go up, fixed income securities prices go ___________________.
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"DOWN" - As interest rates go down; fixed income securities prices go up. This is called INVERSE ACTION.
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The PRIMARY PURPOSE of a STOCK SPLIT is to?
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Increase MARKETABILITY of the the STOCK
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The BOND YIELD is __________.
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The ACTUAL RATE OF RETURN an INVESTOR receives.
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Money NOT paid out to SHARE HOLDERS is called?
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General Retained Earnings
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The GENERAL DIVIDEND PAY for a PUBLIC UTILITIES company is:
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Greater than 75%
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A STRADDLE with DIFFERENT EXERCISE PRICES and/or DIFFERENT EXP MONTH is called_____________________.
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Combination Straddle
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A ________________ or COMBO is PROFITABLE if MARKET PRICE stay within BREAK-EVEN points.
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Short Straddle
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When an INVESTOR is SHORT both CALLS and PUTS, it is either a SHORT STRADDLE or SHORT COMBO, which represents a:
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NEUTRAL Market Strategy
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WHEN you sell an OPTION, the most you can make is the ____________ you receive.
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PREMIUM
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Bonds are ____________.
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LOANS
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When INTEREST RATES decline, all bond prices __________, but the DISCOUNT BONDS (lowest PRICE) would appreciate more (and QUICKER) than bonds trading at a ______________.
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rise; PREMIUM
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A LONG-TERM option to BUY stock at a specified price from the issuing company is called a ___________.
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WARRANT
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An INVESTOR is LONG a yield-based or INTEREST RATE CALL would be profitable if:
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INTEREST RATES went "UP" causing the PREMIUM to INCREASE in value above what the INVESTOR PAID.
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If the MARKET PRICE of the STOCK is below the EXERCISE price of the WARRANT, it will be more than the _______________ of the new issue.
As time passes and the MARKET PRICE of the NEW ISSUE _____________, the WARRANT will become more valuable. |
OFFERING PRICE; RISES
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_____________ bonds can be called (REDEEMED early) at the OPTION of the ISSUER, at a PREMIUM PRICE, after a SPECIFIED DATE.
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CALLABLE
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CALLS are always done at _________.
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PREMIUM Price
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Call features are __________ to ISSUERS--not to the INVESTOR.
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ADVANTAGEOUS
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(T/F) Equity Security holders are not CREDITORS
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TRUE
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An INVESTOR expects a rise in the MARKET buys 10EXJUN170 CALL @ 6 on May 6. By Jun 5th the S & P Index closes at 187.80, and the Investor EXERCISES the OPTION. What is the net profit.
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NET PROFIT = 1,180
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What is the loan value of a 5 ABCMAY60CALL@6 in a MARGIN ACCOUNT?
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Zero
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BONDS can trade at: _________.
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1, DISCOUNT (less than $1,000)
2. PAR (equal to $1,000) 3. PREMIUM (greater than $1,000) |
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LONG PUTS protect ____________ positions.
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LONG STOCK
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LONG CALLS protect _______________ positions.
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SHORT STOCK
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INVESTORS generally DO NOT SELL ______________ to HEDGE.
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OPTIONS
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LONG CALLS HEDGE ___________ positions.
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SHORT STOCK
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__________HEDGE Long Stock positions.
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LONG PUTS
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The _________ "obligates" the SELLER to BUY shares of STOCK from the BUYER.
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PUT OPTION
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TOTAL RETURN is equal to:
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GROWTH + INCOME
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The MKT PX is FAIR and EQUITABLE when the P/E ratio is in the:
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TEENS (e.g. 17:1, 15:1)
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FULLY DILUTED EARNINGS PER SHARE is calculated assuming all potential dilutions occur from:
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Convertible Bonds, Stock Options, Preferred Stock and Warrants.
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EPS may be increased by:
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Tax loss carried forward, reduction of corporate income tax rates and retirement of outstanding bonds.
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CURRENT RATIO is:
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CURR ASSETS/CURR LIABILITIES
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STANDARD MIN RATIO IS:
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2:1
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CURRENT RATIO most accurately describes:
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LIQUIDITY; not PROFITABILITY, COVERAGE or DEBT
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If a CORPORATION experiences "EXTRAORDINARY" items or expenses, this would be reflected in the:
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INCOME STATEMENT
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NET EARNINGS is the figure used to CALCULATE the:
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EARNINGS PER SHARE on a COMMON STOCK.
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TOTAL RETURN is equal to:
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GROWTH + INCOME
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The MKT PX is FAIR and EQUITABLE when the P/E ratio is in the:
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TEENS (e.g. 17:1, 15:1)
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FULLY DILUTED EARNINGS PER SHARE is calculated assuming all potential dilutions occur from:
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Convertible Bonds, Stock Options, Preferred Stock and Warrants.
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EPS may be increased by:
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Tax loss carried forward, reduction of corporate income tax rates and retirement of outstanding bonds.
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CURRENT RATIO is:
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CURR ASSETS/CURR LIABILITIES
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STANDARD MIN RATIO IS:
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2:1
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CURRENT RATIO most accurately describes:
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LIQUIDITY; not PROFITABILITY, COVERAGE or DEBT
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If a CORPORATION experiences an "EXTRAORDINARY" items or expenses, the would be reflected in the:
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INCOME STATEMENT
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NET EARNINGS is the figure used to CALCULATE the:
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EARNINGS PER SHARE on a COMMON STOCK.
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The INCOME STATEMENT (also called a PROFIT & LOSS statement) basically shows:
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1. The AMOUNT of the CORP REVENUES.
2. EXPENSES PAID 3. Amount of EARNINGS remaining after EXPENSES over a PERIOD OF TIME. |
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CURRENT LIABILITIES + LONG TERM DEBT make up:
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TOTAL LIABILITIES
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The BALANCE SHEET of a CORPORATION shows ALL ASSETS and LIABILITIES as of a particular DATE (usually the END OF THE YEAR). (T/F)
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TRUE
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The BALANCE SHEET EQUATION is:
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TOTAL ASSETS = TOTL LIABILITIES + NET WORTH
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ALPHA is best DESCRIBED as:
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A measure of the extent to which a STOCK PRICE will REACT to NEWS or EVENTS related to a particular company.
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BETA is best DESCRIBED as a:
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MEASURE of VOLATILITY of a PARTICULAR stock price.
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BETA OF 1 is based on the EXPECTATION that the PORTFOLIO will:
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Move about the SAME as the MKT.
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BETA OF .8 is based on the EXPECTATION that the PORTFOLIO will:
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Move LESS then the MKT.
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BETA OF 1.3 is based on the EXPECTATION that the PORTFOLIO will:
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Move MORE than the MKT.
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A HEAD and SHOULDERS TOP FORMATION would indicate:
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A BREAKOUT on the DOWNSIDE (BEARISH OUTLOOK)
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A HEAD and SHOULDERS BOTTOM INVERTED FORMATION would indicate:
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A BULLISH TREND; usually an indicator of a FUTURE BULL MKT.
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ARBITRATION PANELS may not impose:
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MANDATORY prison terms.
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The FINRA Code of ARBITRATION PROCEDURES does not cover:
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Disputes between two members of the GENERAL PUBLIC.
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STOCK held in CUSTODIAN form under the UGMA signed only by the MINOR is:
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NOT ACCEPTABLE by the BROKER-DEALER or TRANX AGENT.
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To be a GOOD DELIVERY, a MUTILATED BOND COUPON must be AUTHENTICATED by the:
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ISSUER or TRANX AGENT, NOT the BROKER DEALER. The BROKER DEALER can not AUTHENTICATE or VALIDATE anything.
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BROKER DEALERS who TRANFX funds, including WIRE FUND TRANFX of $3,000 or more:
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Must COLLECT, RETAIN, and RECORD certain information - NAME, ADDRESS, FIN INSTITUTION, ACCT # and AMT of TRANFX.
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MONEY LAUNDERING occurs in THREE STAGES:
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1. Placement Stage
2. Layering Stage 3. Integration Stage |
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Under FINRA Anti-Money LAUNDERING Regulations, SUSPICIOUS ACTIVITY would include:
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1. Lack of CONCERN regarding RISKs and COMMISSIONs.
2. Repeated JOURNAL ENTRIES btwn UNRELATED ACCOUNTS. |
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If a MEMBER FIRM becomes AWARE of a SUSPICIOUS transaction, the FIRM must file a SUSPICIOUS ACTIVITY REPORT (SAR) within________ days.
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30
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FRONT RUNNING occurs when:
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A trade takes place in a SECURITY position because of advanced knowledge of a large upcoming transaction which is expected to influence the market.
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COMMUNICATION with the public include:
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1. Advertising
2. Sales Literature 3. Correspondence |
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Advertising includes:
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1. Websites
2. Newspaper 3. Magazines 4. Radio, TV, Video, Telephone 5. Signs (BBs/motion pics) 6. Telephone directories |
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NO commissions or other form of compensation may be paid if the RR is:
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SUSPENDED or EXPELLED.
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Persons associated with a MEMBER who intend to participate (buy or sell) in a PRIVATE SECURITIES must:
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Give WRITTEN NOTICE to their MEMBER FIRM.
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The FINRA MARKUP POLICY (also known as the 5% policy) applies to all:
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OTC principal and/or AGENCY trades--it would not apply to MUNI BONDS or SECURITIES listed on an EXCHANGE.
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The FINRA MARKUP POLICY is determined by:
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The CURR MKT VAL of a SECURITY; not the COST of the SECURITY.
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PUBLIC SEMINARS conducted by a RR must:
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1. Be APPROVED by the PRINCIPAL of the FIRM
2. A RECORD of the SEMINAR must be MAINTAINED by the FIRM. |
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The MARKUP POLICY does not apply to:
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1. SECURITIES listed on a STK EXCHANGE
2. SECURITIES with a PROSPECTUS or CIRCULAR 3. GOV'T or MUNI Securities 4. Regulation "A" Offerings |
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RRs must pass:
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1. A Qualification Exam
2. Consent to a BACKGOUND CHECK 3. Be COVERED by a FIDELITY BOND 4. Sign AGREEMENTS with the EXCHANGE. |
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Any RR recommendation to a CUSTOMER must:
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1. Suitable to the CUSTOMER.
2. Match their INVESTMENT OBJECTIVES. 3. Be IAW other FACTS the RR knows about the CUSTOMER. |
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When the RR makes a written recommendation, all of the following must be disclosed to the CUSTOMER:
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1. Current PX of the SECURITY
2. Date of the RECOMMENDATION. 3. If FIRM is a MRKT MKR |
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The PRICE of the SECURITY for the last 12 months DOES NOT have to be DISCLOSED when:
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A RR is a making a WRITTEN RECOMMENDATION.
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SELF REGULATORY ORGs are:
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1. Supported by its own members
2. Sets RULES, REGs & PENALTIES 3. Allows it members to VOTE |
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SROs are not Gov't Agencies and:
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DO NOT set MIN COMMISSION RATES.
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All DISCIPLINARY ACTIONS taken by the SRO are subject to:
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SEC review.
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Member FIRMS of the NYSE must be NOTIFIED if a RR is:
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1. ARRESTED
2. SUMMONED to COURT 3. ARRAIGNED 4. Convicted of a CRIM OFFENSE 5. BANKRUPTCY |
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Under NYSE MEMBER FIRM Rules, a RR authorized GIFTS are:
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COMPUTED ANNUALLY and MAY NOT EXCEED $100 GIVING or RECEIVING
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The VALUE of a COLLEGE SAVINGS PLAN is based on the:
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PERFORMANCE of the INVESTMENTS.
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Under a 529 PLAN, an account holder/owner can:
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CHANGE BENEFICIARIES at any time as long as the new beneficiary is a qualified member of the original beneficiary's family.
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Under a 529 PLAN, an account:
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Is NOT penalized in the case of a STUDENT's DEATH, DISABILITY, or RECEIPT OF A SCHOLARSHIP.
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PRE-PAID TUITION PLANS DO NOT have:
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INVESTMENT RISK
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PREPAID TUITION PLAN allows:
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Anyone to establish an account in the name of a student.
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COVERDELL - ESAs are most appropriate for;
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LOW to MIDDLE INCOME level contributors.
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For COLLEGE SAVINGS PLANS, the MAXIMUM CONTRIBUTION LIMIT can be set at more than:
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$200,000 depending on state regulations or guidelines.
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COLLEGE SAVINGS PLAN distributions pay for qualified higher education expenses TAX-FREE (T/F)
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True
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COLLEGE SAVINGS PLANS offer the POTENTIAL for HIGHER RETURNS than___________________.
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PRE-PAID TUITION PLANS (depending upon the performance of the securities in the portfolio).
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ROLLOVERS must be completed within ____________ of withdrawal. Any portion not rolled over will be taxed as __________.
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60 DAYS; ORDINARY INCOME (a 10% penalty).
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Under 403(B) PLANs, if there is a BUSINESS FAILURE, it could:
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Lead to NO PAYMENTS as plan assets could be SUBJECT to the company's creditors.
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Under 403(B) PLANs, DISTRIBUTIONS may begin at:
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59 1/2 and are MANDATORY by age 70 1/2.
Late DISTRIBUTIONS are SUBJECT to a 50% penalty tax. |
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403(B) PLANs are designed for:
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Employees of CERTAIN non-profit organizations only...i.e. public schools, charitable organizations, religious organizations.
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A person who has the power to exercise discretionary authority or control over a plan's management or assets or is paid a fee for investment advisory services is known as a:
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FIDUCIARY
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ERISA contains provisions to protect plans from ___________.
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FIDUCIARY MISMANAGEMENT and MISUSE.
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ERISA was enacted in 1974 to PROTECT the retirement assets of _______________.
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PRIVATE SECTOR EMPLOYEE BENEFIT PLANS.
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It is NOT a requirement that a FIDUCIARY:
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DIVERSIFY PLAN INVESTMENTS
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Under ERISA, if a retirement plan guidelines authorized it COVERED CALLS and TRANSX in INDEX OPTIONS are ALLOWED.
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TRUE
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HIGH SALARIED EMPLOYEES near RETIREMENT:
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BENEFIT THE MOST in DEFINED BENEFIT PLANS.
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CONTRIBUTIONS to ROTH IRAs are TAX DEDUCTIBLE. (T/F)
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FALSE; ROTH IRAs are NOT TAX DEDUCTIBLE.
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UNLIKE TRADITIONAL IRAs, ROTH IRAs may continue after the owner reaches 70 1/2. (T/F)
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TRUE
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CONTRIBUTIONS made in CASH may be made:
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Up to APRIL 15th of the year FOLLOWING the year that the DEDUCTION was CLAIMED.
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TRADITIONAL IRAs are designed for INDIVIDUALS and their SPOUSES who receive:
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COMPENSATION.
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IRA CONTRIBUTIONS MAY invested in:
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1. STOCKS, BONDS, MUTUAL FUNDS and other SECURITIES
2. US GOV'T or STATE ISSUED gold, silver, platinum and palladium coins and bullion. 3. REAL ESTATE |
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IRA contributions MAY NOT be INVESTED in:
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1. Collectible Items - antiques, paintings, rugs, diamonds and stamps.
2. LIFE INSURANCE |
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A test used to determine if any ERISA investment is proper for any employee retirement plan is _____________________.
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"Amount of Risk" involved in the investment.
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If an ERISA plan's guidelines allow it ___________ and transactions in ___________ can be done.
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COVERED CALL WRITING and TRANSACTIONS in INDEX OPTIONS
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Premature withdrawals from VARIABLE ANNUITIES are assessed a _________ penalty (like IRAs).
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10%
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A ___________ ANNUITY pays regular payments until death, regardless of how long the investor lives.
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LIFE
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A ___________ pay out method gives the investor the LARGEST payment of all methods. It pays the MOST, however when you die they keep the PRINCIPAL.
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LIFE ANNUITY
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In a SUBCHAPTER S CORP, ___________ are prohibited from being SHAREHOLDERS.
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NONRESIDENT ALIENS
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In a EQUIPMENT LEASING PARTNERSHIP, partners do not depend on ____________ in the value of equipment since the value of the leased equipment is ___________.
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APPRECIATION; DEPRECIATED.
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The MAIN ADVANTAGE to investors of OIL and GAS programs the _________.
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TAX SHELTER
1. Intangible drilling cost 2. Depletion 3. Tax Deferral 4. Flow Through 5. Depreciation |
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__________ and _________ are among the factors that should be evaluated in considering a REAL ESTATE partnership.
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MANAGEMENT EXPERTISE; ECONOMIC SOUNDNESS
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UNIMPROVED or RAW land cannot be DEPRECIATED under FEDERAL TAX LAW (T/F)
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TRUE
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An investor would purchased UNIMPROVED or RAW LAND for:
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APPRECIATION or CAPITAL GAINS purposes.
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A DPP offered to the PUBLIC must be REGISTERED with:
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The SEC.
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The _____________ of a DPP is a MAJOR CONSIDERATION in establishing the SUITABILITY of a DPP.
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ECONOMIC VIABILITY
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The SUBSCRIPTION AGREEMENT with a DPP must contain:
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1. Understanding of the PROSPECTUS
2. Gen Partner will act as AGENT 3. SSAN or TAX ID 4. Sufficient ANNUAL INCOME and NET WORTH |
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A SIGNED APPLICATION to become a limited partner is called a:
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SUBSCRIPTION AGREEMENT
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A DPP SALE becomes FINAL when:
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The GENERAL PARTNER signs the AGREEMENT.
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True or False--A SUBSCRIPTION AGREEMENT would require a statement of the SOURCE of LIMITED PARTNER FUNDS.
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FALSE
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The ______________ of other LIMITED PARTNERS would not be a CONSIDERATION in the customer's EVALUATION of a DPP.
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FINANCIAL CONDITION
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WASH SALE RULE applies to securities sold a loss within:
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30 days before or after the sale purchases of "SUBSTANTIALLY IDENTICAL" securities; the loss is not allowed in the current year for FEDERAL INCOME TAX PURPOSES.
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WASH SALE RULES apply to the purchases of ________ and ________ securities.
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CALL OPTIONS and CONVERTIBLE .
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_____________ and ___________ contribute to increasing INFLATIONARY PRESSURE.
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FULL EMPLOYMENT and HIGH CONSUMER SPENDING
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To END an INFLATIONARY PERIOD the FEDERAL RESERVE would:
|
TIGHTEN the MONEY SUPPLY (sell GOV'T SECURITIES and RAISE the DISCOUNT RATE)
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A DECLINE in PRICES (with the EXCEPTION of UNION WAGES) and INTEREST RATES is called:
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A DEFLATIONARY PERIOD.
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DEFLATION negatively impact:
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OUTPUTS and EMPLOYMENT
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A STRONG DOLLAR causes:
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1. Less COMPETITIVE exports
2. More COMPETITIVE foreign imports |
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DEPRECIATION of the DOLLAR (Weak Dollar) causes:
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1. More COMPETITIVE US Exports
2. Less COMPETITIVE foreign imports. |
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As INTEREST RATES rise:
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The US DOLLAR rises and foreign currency values decline.
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The FLOATING EXCHANGE RATE is determined by:
|
CENTRAL BANK and MKT FORCES intervention...i.e. SUPPLY and DEMAND
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The IMF is funded by:
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INDUSTRIALIZED nations and its PURPOSE is to promote MONETARY and EXCHANGE stability and INTERNATIONAL TRADE.
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The WORLD BANK purpose is:
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to ASSIST DEVELOPING nations by providing them LOANS.
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The SEC (DOES/DOES NOT) have jurisdiction of the EURODOLLAR BOND MKT (therefore it provides less legal protection than the US BOND MKT).
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DOES NOT.
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BOND BUYERS should buy LONG TERM SECURITIES during:
|
A NORMAL or POSITIVE YIELD CURVE.
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SHORT TERM MONEY MARKET INVESTMENTS are the SAFEST during:
|
a NEG or INVERTED YIELD CURVE.
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BOND BUYERS should consider SHORT or INTERMEDIATE BOND MATURITIES during:
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Periods of ECONOMIC UNCERTAINTY (or FLAT YIELD CURVE)
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A downward SLOPE and sharp/quickly rising INTEREST RATES indicate:
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An INVERTED YIELD CURVE.
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COMMERCIAL PAPER represents an _______________.
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UNSECURED PROMISSORY NOTE and is one of the best ways for a CORP to raise SHORT TERM FUNDS.
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COMMERCIAL PAPER usually yields more than:
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TREASURY BILLS
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The QUALITY of COMMERCIAL PAPER is rated by:
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1. Standard & Poor's
2. Moody's 3. FITCH |
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A.M. BEST does not analyze COMMERCIAL PAPER. Instead they rate:
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INSURANCE COMPANIES
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If the FED RES is PURCHASING GOV'T SECURITIES it causes:
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1. Bank DEPOSITS to INCREASE.
2. Bank RESERVES to INCREASE. |
