500

What is the mission of the SEC?

Protect investors and maintain fair, orderly markets.

Which Act created the SEC?

Securities Exchange Act of 1934.

Does the SEC bring criminal charges?

No; the DOJ handles criminal cases.

Who regulates broker-dealers?

FINRA.

FINRA receives its authority from?

The SEC.

Who writes rules for municipal securities?

MSRB.

Who enforces MSRB rules for broker-dealers?

FINRA.

What does SIPC protect?

Customer securities and cash if a broker-dealer fails.

What is the SIPC coverage limit?

$500,000 total, $250,000 cash.

Does SIPC protect from market losses?

No.

FDIC insures what?

Bank deposits up to $250,000.

What is the primary market?

Where new securities are issued.

What is the secondary market?

Where existing securities trade.

What is the OTC market?

Off-exchange trading of securities.

What is the third market?

OTC trading of exchange-listed securities.

What is the fourth market?

Direct institution-to-institution trading.

What is an ECN?

An automated system that matches buy and sell orders.

Who are institutional investors?

Entities like funds, banks, insurance companies.

Accredited investor income requirement?

$200k individual / $300k joint.

Accredited investor net worth requirement?

$1M excluding primary residence.

What is an underwriter?

Firm that helps issuers raise capital.

What is a syndicate?

A group of underwriters sharing risk.

What is a transfer agent?

Manages stockholder records and transfers.

What is a custodian?

Entity that safely holds customer assets.

A broker acts as?

Agent.

A dealer acts as?

Principal.

Leading economic indicator example?

Building permits.

Lagging indicator example?

CPI.

Coincident indicator example?

GDP.

Stages of the business cycle?

Expansion, peak, contraction, trough.

Inflation harms which investors?

Bondholders.

Fed buying securities causes rates to?

Fall.

Fed selling securities causes rates to?

Rise.

Strong dollar benefits?

Importers.

Weak dollar benefits?

Exporters.

Keynesian theory focuses on?

Fiscal policy.

Monetarist theory focuses on?

Money supply.

Common stock represents?

Ownership in a corporation.

Preferred stock offers?

Fixed dividends and senior claim over common.

Rights give shareholders what?

Ability to buy new shares at a discount.

Warrants allow?

Purchasing stock at a set price long-term.

ADRs represent?

Foreign securities in U.S. markets.

ADRs carry which risk?

Currency risk.

Par value of a bond?

$1,000.

Bond coupon rate?

Annual interest divided by par.

Current yield formula?

Annual interest ÷ market price.

Yield to maturity includes?

Gains or losses to par.

Relationship between bond prices and rates?

Inverse.

Longer maturity bonds have more?

Interest rate risk.

T-bills maturity?

1 year or less.

T-notes maturity?

2–10 years.

T-bonds maturity?

20–30 years.

Agency securities examples?

FNMA, FHLMC, GNMA.

GO bonds backed by?

Taxing power.

Revenue bonds backed by?

Project revenue.

Money market instruments include?

CP, T-bills, repos, BAs.

Money market key feature?

High liquidity.

Call option gives the right to?

Buy.

Put option gives the right to?

Sell.

Call is in-the-money when?

Market > strike.

Put is in-the-money when?

Market < strike.

Option premium = ?

Intrinsic + time value.

Covered call advantage?

Income from premium.

Naked call risk?

Unlimited loss.

Tax on exercised call option?

Premium added to cost basis.

Tax on exercised put option?

Premium added to proceeds.

Expired option taxed as?

Capital loss.

NAV priced when?

Once daily after market close.

Index funds use?

Passive management.

ETFs trade?

Intraday on exchanges.

ETNs carry what risk?

Issuer credit risk.

UIT characteristic?

Fixed portfolio, no active management.

Variable annuity regulated by?

SEC + state insurance + FINRA.

Who bears risk in variable annuity?

The investor.

Who bears risk in fixed annuity?

The insurance company.

Minimum REIT distribution?

90% of taxable income.

Equity REIT invests in?

Properties.

Mortgage REIT invests in?

Mortgages.

Hedge fund characteristic?

Illiquid with high minimums.

529 savings plan uses?

Market-based investments.

529 prepaid plan?

Locks in future tuition prices.

ABLE accounts used for?

Disability-related expenses.

Systematic risk affects?

Entire market.

Business risk is?

Unsystematic.

How to reduce unsystematic risk?

Diversification.

Reinvestment risk occurs when?

Interest rates fall.

Prepayment risk applies to?

Mortgage-backed securities.

Extension risk occurs when?

Rates rise, prepayments slow.

Liquidity risk?

Cannot sell quickly.

Credit risk?

Issuer may default.

Political risk?

Foreign investments.

Inflation risk?

Loss of purchasing power.

Hedge long stock with?

Long put.

Hedge short stock with?

Long call.

Protective put protects?

Long stock position.

Asset allocation means?

Distribution of investments across classes.

Rebalancing does what?

Restores target allocation.

Diversification reduces?

Unsystematic risk.

Market order executes at?

Best available price.

Limit order executes at?

Specified price or better.