SIE Exam

what the Fed does does combat inflation

Raise Interest Rates

Life with period certain

ensures payments for a specified number of years, even if the beneficiary dies before the end of that period.

Balance of payments

money moving into the U.S. Economy versus money going out of the U.S Economy. an indicator of whether the country has had a deficit or a surplus

hypothecation agreement

the pledging of securities as collateral

double barrel bonds

backed by property taxes and revenues from project such as user fees

Feasibility Study

details the economic practicality for a proposed project that will be funded by a bond issue.

Rule 144

when securities are bought in private placement, they bceom restricted securities. must be held for 6 months. allows the sale of 1% of the issuer's outstanding shares or the weekly average of the preceding 4 weeks trading volume to be sold every 90 days

initial margin for short stock positions under regulation T

50%

maintenance margin set by Finra

for short margin: 30%

for long margin positions: 25%

sell stop order

order to sell at a price that is lower than the current market. used to stop a loss on a long atock position.

formula to find the public offering price

Net Asset Value / (100% - Sales charge %)

money market funds

have a constant NAV of $1.00. Invest in short-term instruments. rarely have a sales charge

a "breakpoint sale"

a violation where a registered rep suggests that an investor purchases a mutual fund just below the point at which they would receive a discounted sales charge

Bankers Acceptance

a money market instrument used to finance emerging country imports and exports

Term corporate bonds are quoted:

on a percentage of par basis

Nominal Yield

the interest rate, also known as the "coupon rate" expressed as a percentage of the principal of the bond

SIPC Rules

max of $500,000 in protection available per margin account, and $250,000 per cash account

securities held in "street name"

shares maintained and held in broker dealers name

the broker is known as nominal owner

and customer is the beneficial owner

letter of intent

covers a period of 13 months used by individuals who want to qualify for a lower sales charge when purchasing mutual funds

rights of accumulation

A privilege that allows mutual fund shareholders to receive sales charge discounts based on the current value of their investment in a fund or all funds in a family

what technique protects against systemic risk

hedging investments

a bond indenture

a contract between the bond issuer and a trustee for the benefits of the bondholders

a Mutual fund's NAV is figured using:

Forward pricing

retail communication

Any written communication distributed or made available to 25 or more retail investors in a 30 day period. even if sent to institutional investors

institutional communication

sent only to institutional investors

Regulation T

set by the FRB, the initial margin requirement is 50% of sale proceeds to be deposited in the customer's margin account. Municipal bonds are exempt

Call loans made by banks to broker dealers are secured by

partially paid securities held in margin accounts for customers of broker dealer

an officer of a trust can open a margin account if:

the trust agreement specifically authorizes the opening of a margin account

if an employee wants to open an options account at another firm…

written permission must be obtained by the employing firm beforehand

the bid

the price the dealer is willing to buy from the customer (customer sells to the dealer

the ask

price the dealer is willing to sell (the customer buys from the dealer)

hedge funds

unregistered private placemnts for only accredited investors. quite illiquid.

REITs

A minimum of 75% of the gross assets must be in Real Estate related activities.

Must distribute at least 90% of earnings to shareholders. allow for flow through of gain but not flow through of loss

eurodollars

US dollar deposits held in foreign braches of US banks or foreign banks

T bills

registered in the owner's name in book entry at a discount. short term bonds

when interest rates rise…

Longer maturity bond prices are affected more than shorter maturity bond prices. T bonds are affected more than T bills

ADRs

ficilitate domestic trading of foreign securities. distributes dividends. do not allow voting or pre-emptive rights

type of security least affected by a recession

Utility company

Leading Indicators

predicts future trends

rights

issued to company’s existing shareholders. issued at a price below the market price. expire after 2-4 weeks.

coincident indicators

real type snapshot of economy

warrants

issued with a new bond offering. issued at a price above the market price and expire after 2-10 years

lagging indicators

reflects past economic shifts

Securities exempt from SEC registration

US treasury securities, municipal securities, agency securities

the VIX

index option traded on CBOE that tracks S&P 500 Index Volatility. european style

the expense ratio of a mutual fund

a measure of operating efficiency

cumulative voting

a voting system that allows shareholders to allocate their votes across multiple candidates for a board of directors.

statutory voting

a voting system where each shareholder casts one vote per share for each candidate, typically resulting in a straightforward election of directors.

GO bonds

municipal bonds that are backed by the "full faith and credit" of the issuer. Principal and interest payments are paid from the tax revenue generated by the issuing state of municipal entity. . Lower risk of default than revenue bonds; lower yields and higher ratings than revenue bonds. fund things that benefit all member of community such as parks, libraries and schools

how much a REITs annual income must be distributed to shareholders

90%

serial bonds

bonds that mature at specified interval over a pre-determined time period

term bonds

entire issue reaches maturity on same date

fiscal policy

set by Congress. includes government spending and setting tax rates

monetary policy

policy of the Fed. the four tools are DORM

D is Discount rate

O is open market operations

R is reserve requirements

M is margin on securities

leading indicator examples

new consumer goods orders, building permits, initial claims for unemployment

coincident indicator examples

GDP, employment levels

to hedge a long stock position

buy a put

the bond counsel opines…

validity, legality and tax exempt status. but not feasibility

a GAN (Genral Anticipation Note)

a municipal debt instrument in anticipation of receiving federal transit funding

a RAN (Revenue Anticipation Note)

a municipal debt instrument paid from expected revenues. source of funding is usually federal highway funds

zero coupon bonds

bought at a discount and mature at par

CUSIP number

identifies a security

DTC (Depository Trust Clearing Corp)

maintains electronic book entry of stock ownership

the yield measures highest to lowest for bonds trading at a premium

Nominal, Current, Yield to Maturity, Yield to Call

Regulation D

rule that allows some companies to sell securities without registering with the SEC

customer trade confirmations must be provided to customers…

at or before the settlement date of the transaction

403(b) plans

defined contribution plan designed for employees of public schools and non profit organizations

limit orders

guarantees if an order is executed, it will be at the specified price or better

Rule 144A

allows issuers to sell large blocks of private placements without SEC registration to QIBs (qualified Institutional buyers)

QIBs (Qualified Institutional Buyers)

institutional investor with at least $100 M available

Regulation SP

covers the privacy of customer information

Mutual fund companies must pay redemption proceeds…

within seven days of the order

joint accounts with rights of survivorship

if one participant dies, the decendents share will go directly to the other participant

joint account with tenants in common

if one dies, their percentage goes into the estate

consequence of an amortized bond premium

tax basis decreases

backing away

prohibited practice when a firm fails to honor a quote they published

interpositioning

prohibited practice of using a third party bewteen a broker dealer and the market

the trust indenture act of 1939

applies to corporate bond offerings in excess of $50 million

supply side theory

economic growth is stimulated by tax rate reductions

distributions from an IRA must commence…

by April 1st of the year following age 73

401(k) plan

corporate sponsored plan that allows employess to contribute pre tax dollars that grows tax deferred. distributions at retirment are 100% taxable.

commercial paper

unsecured, short term debt issued by corporations with high credit ratings

depression

when a contraction last more than six quarters

pump and dump

a prohibited practice when a thinly traded stock is promoted by scammers who sell when the value rises

SARs, and AML reports must be maintained…

a minimum of five years

income statement

shows a company’s profitability

cash flow statement

shows a firm’s liquidity

balance sheet

shows what a business owns

types of oil and gas participation programs

Income: buy proven oil reserves

Developmental: drill near existing oil fields

Exploratory: drill in unproven areas

correspondence

communication distributed to fewer than 25 or fewer retail investors

Right to Buy at strike price. Bullish

Long Call

Obligation to sell. Bearish

Short Call

Right to Sell. Bearish

Long Put

Obligation to buy. Bullish

Short Put

Long Call

Max Gain: Unlimited

Max Loss: Premium

Short Call

Max Gain: premium

Max Loss: unlimited