A zero coupon bond avoids?
reinvestment risk, while a high coupon bond would help prevent purchasing power risk
Commercial paper, along with bankers acceptance are exempt from which act and why?
the act of 1933, as long as their maturity is 270 days or less. BA's are for importing I believe and CP is? I forget exactly. I know it has a large minimum. These are also money market instruments.
A workable quote is?
given by a muni dealer shows that he's willing to buy it at a stated price which is usually done on behalf of a customer who wants to sell the bonds due to the lack of the secondary market. Essentially its a quote that he gives to his client showing a lik
How to get net revenue
Gross revenues minus operation and maintenance costs.
So net revenues is what's left after operation and maintenance costs have been covered - then it pays off the rest (with debt service coming first.
A Catastrophe call covenant would be used in the case of?
whatever is being funded (example being a facility that can no longer produce revenue (condemned). This call provision allows the issuer to call in the bonds, allowing the holders to be repaid.
A sinking fund covenant is?
issuer is obligated to call in a portion of a bond issue at regular pre-determined intervals, but the actual bonds are called randomly. The issuer regularly deposit funds into an escrow account thats eventually used to redeem/repurchase the outstanding pr
A defeasance covenant is? (Not answered)
legal "shifting" of a municipal bondholder's claim on an issuer's taxing power or revenues, going to another acceptable form of collateral. The municipal issuer will buy U.S. Government securities, Agency securities, or sometimes bank certificates of depo
A maintenance covenant requires?
the issuer to maintain the facility in good shape assumably so business is continued
Whats a dutch auction?
an auction where the minimum bid can be $25k increments.
What is the clearing rate at auctions?
Lowest rate interest offers are picked first going up and up until all securities are sold. This is the "clearing rate" which all securities issued now have for the next week.
What causes an auction to fail
if there are more sellers than bidders, and also if the bid rates were higher than the clearing rate which was set for the auction.
CAPM?
stands for Capital asset pricing model. This is the method for finding good investment by analyzing the price compared to the relative risk. Greatest return for the worthwhile risk.
Turnover ratio is
Annual cost of sales divided by year end inventory
Jumbo Certificate of Deposits are issued by? Size?
banks in amounts larger than $100k (usually in minimum sizes of 1 million). The FDIC only covers up to $250k.
- The SIPC does not cover bank deposits, it covers customer accounts at security firms with 500k being max, 250k cash
A stock's "support level" is
priced below the current market value. So if it has "support" then people think it wont decline from there. So if it breaks through its support level, then it's very bearish. All those ready buyers have been cleaned out and now there are just a lot of sel
In regards to rule 144 sales, how must they be sold?
Must be sold on an agency basis and the firm can not solicited these sales.
What is controlled stock?
registered stock owned by top-level officers of the company
To be registered, the company must be publicly trading.
Sale of control stock is not subject to the minimum 6 month holding period requirement, but is still subject to the quarterly sales volume
Rule for size of sale within rule 144
1% of the Average of the last 4 weeks of sales
What is defined as Option Communication?
Options communications that are distributed to more than 25 existing or prospective clients must be approved in writing prior to use by the designated Registered Options Principal
Options institutional sales literature and public appearances are subject to?
2 public communications that do not require designated ROP approval. However, they are subject to the firm's policies and procedures.
What is defined as correspondence
A communication to 25 or fewer existing or prospective retail clients - post use review and approval
What is defined as retail communication
A communication to more than 25 existing or prospective retail clients - must be approved by a principal prior to use and are subject to FINRA filing rules
Advance/Decline theory, is a theory that? Generally used by?
theory that measures the strength of the market by comparing the total number of issues advancing and declining in pricing. This tactic is used commonly by
Technical Analysts.
Price/Earnings ratio measures? What kind of factor?
how many times the market price of a stock is relative to its earning. This is a "Fundamental Factor
The "Efficient Market Theory" says?
that prices of securities in the market fully reflect all public available information so under/overvalued stocks don't exist, so analysis isn't helpful, which is a sack of shit
The what type of indicator is the confidence index?
fundamental indicator of consumer sentiment. but isnt a technical indicator
What is a "short term profit" under Internal Revenue guidelines
is a long sale, at a price higher than the security's cost basis, made within one year following purchase
What is accretion ?
reported as taxable interest income for that year; and increases the bond's cost basis. This MUST be done with discount bonds Essentially it is a way to report the interest gained on the discount bonds. It increases the cost basis yearly. So on maturity t
Amortization is?
The exact opposite of accretion. Same tactic, but amortization is for PREMIUM bonds, decreasing cost basis yearly, while accretion is for discount bonds.
Both MUST occur for primary market muni's
DPP programs include (4)
Oil drilling, condominium investments, agricultural projects and equipment leasing
What's a Horizontal spread?
A horizontal spread is purchasing both a long and short call or put (same type) on the same security, same strike price but with different expirations.
When is the dividend taxable to the reciever
Upon receiving it, not on the record date or the date announced
How do you find equivalent tax free yield?
Taxable yield (what it is priced to yield)
multiplied by (100-tax bracket)
A 7%, 15-year corporate bond is priced to yield 7.50%. For an investor in the 28% tax bracket.... so 7.5x(.100-.28)
What's a Vertical spread?
A vertical spread is is being long and short a call/put on the same security, different prices but same expiration date.
What's a Diagonal spread?
A diagonal spread is being long and short a call/put as with different prices and expirations
What are Cabinet trades and whats another name for them
accommodation liquidation, and they're for customers to close worthless contracts to have a printed record of the event unlike if it were to expire (for tax purposes). A customer closes them for $1 a contract ($0.01 a share) - and the customer pays a comm
In the weekly treasury bill auction whats the breakdown between competitive and non-competitive bids
35% (max) of securities can go to competitive bids, which have no max dollar, and the other 65% (minimum) goes to non-competitive bids which have a minimum bid of $5million
The "total takedown" is the
discount given to syndicate members from the syndicate manager. This discount is earned when the member sells a bond directly to the public. To 2 portions of the takedown is the selling concession and the additional takedown
- Additional takedown is earne
What is regressive tax?
a tax, such as excise taxes and sales taxes, that remains at the same rate regardless of a person's income.
Regressive taxes affect poor people more adversely because they take a larger percentage of their income
What is a K-1 form?
tax reporting form sent annually by the general partner(s) to each limited partner that details the limited partner's share of income and loss from the venture for the tax year.
An oversold position is?
term to describe a stock (or the market) whose value has fallen quickly and sharply, far below its actual worth.
Usually this shows that the price will rebound (its a bullish position)
An inverted saucer is known as? Usually indicates?
Known as a head and shoulders, and indicates that soon will be a bearish movement.
What's the IRS "Wash sale rule" ?
a rule disallowing a capital loss resulting from the sale of a security if the customer has bought the same or a substantially similar security during the period starting 30 days before the sale until 30 days after the sale
An action that would result in
Rule 72t states:
it allows annual payments to deplete the IRA account over that individual's expected life, so if someone begins getting distributions from their annuity prior to 59.5yrs, they avoid the 10% penalty and are only partially taxed from ordinary income
also re
SMA can only be borrowed if?
the account is above minimum maintenance margin. It can only be borrowed in an amount that brings the account to maintenance - not below maintenance.
Rule for required margin from stocks priced $2-5
rule for shorting a stock under $5, the minimum rule changes to the greater of 100% or $2.50 per share. Rule is under Reg T
Rule for required margin from stocks priced $5-10:
short a stock priced from $10 down to $5, the minimum is $5 per share. Thus, to short 1,000 shares at $5, $5,000 must be deposited.
- $5 a share or 50% of purchase, whichever is higher. Rule is under Reg T
Under Reg T, an extension for payment may FIRST be requested, under extraordinary circumstances, on the:
4th business day after trade (S+2)
When new agency securities are sold through a selling group to the public, what would the customer have to pay?
Just par. No mark up or concessions for government securities sold straight to the public (a selling concession is taken from the proceeds, not added to the price)
What is a "risk-less trade"?
When a dealer gets an order for a trade, buys it into his inventory and immediately sells it.
What is the maximum mark up allowed?
5% - but any mark up must be disclosed to the customer
What's a "locked in trade"?
A locked in trade is one where all the terms and conditions are accepted by buyer and seller. Locked in trades do not occur OTC or for pink sheets.
What's a stocks resistance level?
If a stock breaks through this resistance level, it is the opposite of the support level. It is now breaking out to the upside instead of downside. Once it breaks through this resistance level, it is expected that it will move sharply upward.
(Now remembe
Who cancels orders If they remain unexecuted (regardless if day, month or whatever)?
- The member firm. Remember that the DMM specialist only accepts day orders.
Equity trade reporting must be reported how long after execution?
Must be reported by the executing member within 10 seconds, which is the rule for every market.
The "trade through rule of regulation NMS" requires?
All market makers on exchanges to execute prices at the best price possible.
What does the rule 605 of SEC rules within regulation NMS say
NMS is "National Market System". Mainly its a "trade through" rule for "fast markets" (top 3).
Says that these markets are required to fill in orders at the best price, within seconds or they have to reroute it somewhere else that has a better price.
has
what do reports show within NMS
Reports must show speed of executions, fill rates, and any price improvements
Whats a municipal parity bond?
A muni bond that has equal claim on tax collections or revenues as other obligations from that issuer. (like 3 GO bonds being out, then a forth comes out. Or if there were 2 revenue bonds out, they're parity to each other)
Portfolio Margining requires? What does this entail?
a minimum of $100k, and is only suitable for sophisticated investor. Such an account requires not only branch manager approval, but also separate approval of a designated Registered Options Principal
Allows for things such as naked calls to be available.
The Order Book official is:
An exchange employee who manages the book of public limit orders for option contracts. They're not market makers so they cannot maintain bids/ask quotes.
The VIX index is?
A measure of vitality within the S&P 500 index. Higher volatility is usually associated with bear markets. So if the S&P is dropping, the VIX is usually getting higher. They're opposites.
What type of life policies allow for flexible/adjustable premiums?
Only universal life policies allow for the changing premiums.
Variable and whole life plans have a fixed premium (keep in mind the cash account is put into a mutual fund so there is a requirement for prospectuses, and if you don't pay the premium, they'll
What is the RMD penalty tax?
50% penalty tax if it is not taken.
But if taken out regularly, it is valued at market value and taxed at ordinary income rates
What's a defined benefit plan
a tax-qualified pension plan, where it calculates a pre-set annual contribution based on expected future benefits.
The employer sets a retirement plan up and the payments depend on the employees who are paid the highest, and those closest to retirement, b
What is a definition of a defined contribution plan?
Tax qualified pension plan where the contributions made by the employer are based on a percentage of the employees income. - But everyone still gets an annual contribution.
Treasury Receipts are?
government bonds which are stripped of coupons and issued by broker-dealers - who held these securities in a trust and then sold off the cashflow as zero coupon obligations.
Purchased on discount but must be accreted annually and that accretion amount is
Going short against the box leads to?
a net position of zero.
Ex = being 1000 shares long and 1000 shares short.
There is technically no risk but FINRA puts a cap on 5% of maintenance margin of the total value to be applied to the long position.
Whats a NMFBA?
a non managed fee based account, which is a good choice for active traders since there is no constant commissions. This account must be reviewed at least annually
Whats the Super Display book system?
its NYSE automated trading system. The maximum order size is 3Million, but it does allow for limit, day and market orders.
Whats the CQS?
Consolidated quotation service which shows bids and asks for exchange listed stocks
What does the Federal Telephone Consumer Protection Act of 1991 apply to?
prevents any unsolicited offers made through the phone. Fax's, pre recorded messages and personal contact.
A bond counsel renders their opinion towards? What do they examine? (3 things)
Legality, Validity and tax exempt issues.
To do so, they examine tax regulations, municipal statutes, state laws and judicial edicts
When must contributions to someone's IRA account be made?
April 15th is the last tax filing date permitted under an extension permitted. (April 15th of the following year (Tax filing date). So make ur 2020 contributions on April 15th 2021 latest
Whats PSA stand for?
Prepayment speed assumption. This applies to mortgage backed securities. This is just an assumed guess of how long the security will last. Obviously there is still the risk that it will be paid off quicker.
At what beneficiary age do contributions to a corvdell account must cease?
No more contributions once they meet age 30. The account may be transferred to someone under 18 though.
What's Rule 103 of Regulation M say about marker makers?
Says a market maker must resign his position while it begins but may be a passive market maker. This prevents any increased price or something because if he was active he would want the higher price obviously.
An overbought position occurs when?
market price averages are rising, but the strength of the market is weakening because the number of advancing issues is declining relative to falling issues.
The market is soon to hit a peak.
Who are the regulatory bodies for the rules set by the MSRB
Office of Comptroller of Currency (OCC), Fed reserve board and the FDIC
The Securities Act of 1933 requires?
1933 is about the registration of non-exempt new issues
The Securities Act of 1934 requires?
The Securities Exchange Act of 1934 is about registration of exchanges, their members with the SEC, stabilization of new issues in the secondary market under prescribed conditions.
The role of a registrar versus the agent and rights agents is
The agent handles the mailings to the shareholders of dividends, corporate reports and voting materials. A rights agent is usually the existing transfer agent of the issuer. Shareholders submit their rights to the rights agents and then he delivers the sh