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24 Cards in this Set
- Front
- Back
Credit spread investors want the spread to narrow.
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MSRB establishes rules but has no enforcement powers.
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Total takedown = additional takedown + concession
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General obligation bond is backed by full faith and credit of municipality.
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All cash + dividends are responsibility of short seller
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Stock must be purchased before ex-div date to be eligible for dividend
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Items such as tolls, lease rental payments are used to back revenue bonds
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STRIPS= zero coupon treasury bond
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Notice of sale is published by Issuer. Contains all info about bidding process.
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Sales charge of a mutual fund is always expressed as a % of offering price. SC = (Bid-Offer)/Offer
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T+3 for a muni bond transaction means bonds will settle regular way in 3 business days from trade date
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Corporations have tax advantage for dividends rec'd from preferred and common stock of other corps.
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Restricted persons not allowed to purchase shares of equity IPO under FINRA's New Issue rule. Restricted persons include immediate family members, portfolio managers.
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Income bonds require payments only if corporation has enough earnings. In all other instances of debt obligations, corps MUST pay interest regardless.
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Underwriter's counsel = attorney who represents interests of underwriters.
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U.S. govt. bonds are quoted in 32nds. Ex. 95.28 = 95 23/32 = 95.875
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Anyone who receives compensation for working is eligible to establish IRA.
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Max that individual can contribute to an IRA annually is lesser of $5000 or 100% of annual compensation.
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Margin accounts + short selling now allowed for IRA accounts
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Contributions and investment gains in IRA accumulate tax-deffered. Only taxed once when withdrawn owner is 59.5 years old. Otherwise 10% penalty for withdrawals.
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Remember contributions to IRA are only taxed once- either when withdrawn or when first contributed
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529 plan: for education expenses; contributions made with after tax dollars; earnings are tax-deferred.
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Difference between Coverdell and 529 plans: 529 only used for higher education, Coverdell used for both higher and elemetary school education. Income limits apply to Coverdell, not 529.
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Qualified retirement plans (received favorable tax treatment) must meet ERISA standards
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Qualified retirement plan can be either Defined Contribution (employer makes specific annual contribution to plan) or Defined Benefit (employee gets paid specific amount each year after retirement) or
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Profit-sharing plans include #1 401(k) , #2Employee Stock Option plan (invested in company's stock), #3Keogh Plan (Self employed people; contribution must be max of $49,000 or 20% income), 403(b) plan (certain non-profit org's); 457 plan(government employees).
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Qualified plans: Earnings grow tax-deferred. Contributions tax-deductable. Needs IRS approval. Organized as a trust. May not discriminate. No cost basis. Withdrawals taxed as ordinary income.
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Non-qualified plans: Earnings grow tax-deferred. Contributions are not tax-deferred. No IRS approval. Typically informal agreement. May discriminate. Individual contribution establish cost basis. Withdrawals in excess of any cost basis are taxable.
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3 types of Investment companies:
#1 Face-amount certificate companies #2 Unit Investment Trust #3 Management company (either open-end mgmt companies aka. mutual fund or closed-end mgmt companies |
Open end funds are sold at POP (POP = NAV + SC). They do not trade in secondary market. Continual issuance of shares.
Closed end sold at supply/demand price; trade in secondary market; issue fixed number of shares. |
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Diversified management company: 1) at least 75% of assets invested. 2) No more than 5% of invested assets invested in one company. 3) Mgmt co. cannot own more than 10% of a company's voting stock.
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Advantages of investment companies: 1) Diversification. 2) Professional mgmt. 3) Liquid. 4) Easy investing approach.
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Mutual fund has: Investment advisor, Custodian, Transfer Agent, Underwriter.
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Fund shares: Sponsor is the underwriter. Sponsor sells shares to Dealer.
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NAV per share = Total net assets/Number of shares outstanding
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Offering price = NAV/Compliment of SC%
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2 sources of gains in mutual funds: capital gains and dividends. Qualified divs are taxed 15% Non-qualified divs are taxed as ordinary income. Cap gains are taxed based on whether long term or short term.
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2 types of REITs: Equity (portfolio of RE) and Mortgage (borrows money and lends at high rate to building developers).
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Progressive (increases on income) vs Regressive (flat) taxes
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Most income = ordinary income
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Dividends held more than 60 days from ex-div date = 15% tax
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Three types of income- Earned, passive, and deferred.
Three types of investment income: interest, dividend, capital gains. |
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3 levels of tax- federal, state, local. Muni bonds subject to state tax (sometimes). Govt. bonds subject to federal. Corporate bonds subject to both state and fed tax.
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Investor's profit in securities sale = cost basis - proceeds from sale.
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Investors have ability to designate which position is sold to maximize tax benefit (otherwise FIFO method is used by default).
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When convertible bond converts to stock, cost basis = original value of bond.
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Gain from secondary market sale of bond = ordinary income (federal tax).
Gain from original issue discount = interest income (exempt from fed tax). |
If bond is sold prior to maturity, only taxed @ level in excess of "prorated" level.
Cap gains on a premium bond (bond bought at a premium) depends on how many years it has been held by owner before being sold. |