Series 65

Expense ratio

fund expense/total net assets

how to create a covered call

selling calls against long stock positions to generate income

What kind of correlation does precious metals have with CPI?

positive correlation (as inflation rises, so do the value of precious metals)

Lagging Economic Indicators

Unemployment, corporate profits, prime rate, labor costs per unit output

Coincident Economic Indicators

GDP, industrial production, personal income, non-farm payrolls

Leading Economic Indicators

Stock market returns, building permits, manufacturing orders

Net worth requirments

apply to investment advisers

Net capital requirements

apply to broker dealers

Time weighted return

return attained when initial purchase is held for a specific amount of time (often utilized by fund managers)

regressive tax

flat tax rate, regardless of the amount of money involved (think sales tax)

Present value determines…

the current value of future cash flow

Howey Test: If a product meets these characteristics, it is a security

1. Investment of $

2. Common Enterprise

3. Expectation of profit

4. 3rd party effort

Fully paid securities must be

segregated

Securities purchased on margin may be

commingled

The 2 exceptions to borrowing/lending $ to a customer or client

1. if the client is in the business of lending money (banks)

2. the client is an affiliate of the broker dealer

Inherited Securities

cast basis is stepped up to the value on the date of death. Holding period is always long term

Gifted Securities

retains the original cost basis and holding period when gifted

Sharpe Ratio

(actual return-risk free rate of return)/ standard deviation

When a company pays cash dividends, what changes?

total assets and total liabilities

Wash Sale

investor swaps identical issue of stock

Common form of investment vehicle for venture capital

limited partnership

LLC (Limited Liability Company)

Protects personal assets from business debts. Taxes "pass-through" to owners' personal returns

General Partner

The managing partner in a partnership, who holds full personal liability for business debts and lawsuits

Limited Partner

A passive investor in a partnership whose liability is limited strictly to their financial investment

S Corporation

A tax classification (not a distinct legal entity) where profits pass through to owners' personal taxes, avoiding double taxation. It restricts ownership to 100 U.S. citizens/residents

C Corporation

A completely separate legal entity that files its own corporate tax return. It provides the strongest liability protection but is subject to "double taxation" (taxed on profits, then taxed again on shareholder dividends)

What is NOT a relevant factor when considering recommending a mutual fund

The funds net asset value per share

The Administrator has a number of punitive powers. If, while registered, you did something improper, the worst thing that the Administrator could do to you is

revoke your registration

A research analyst studying the performance of ABC Industries compares that with reports from other analysts reviewing other companies in other industries. This is known as

Bottom-up analysis

Size, number of locations and services provided are all relevant for a Business Continuity Plan (BCP). What is NOT relevant for a BCP is

the firms net annual income

One of your very generous clients has used up her lifetime gift exclusion. Continuing to make gifts, she gives $500,000 to a grandchild and $50,000 to the child of a friend. What are the tax consequences of these gifts?

The tax rates on both gifts will be the same

A QDRO applies on ly to assets in a

qualified employer plan

Best protection for a short stock position

buy a call

if you think prices will remain flat, you should

sell a call option

The alternative minimum tax (AMT) is designed to ensure that certain high-income taxpayers do not avoid all income tax. This is done by adding back to the taxpayer's ordinary income, items such as accelerated depreciation and excess intangible drilling costs. The term used to describe these items used to arrive at the taxpayer's alternative minimum taxable income (AMTI) is

tax preference items

On a scheduled premium variable life insurance policy, the insured is guaranteed:

the death benefit

if the market is going to decline:

buy a put option

Under Rule 206(4)-7 of the Investment Advisers Act of 1940, each investment adviser registered with the SEC is required to adopt and implement written policies and procedures designed to prevent violation of the federal securities laws. Ensuring that this is done is the role of

the chief compliance officer (CCO)

In an equity straddle, the option BUYER is looking for _______

while the option seller is looking for ___________

volatility/stability