Wiley Series 7 Exam Review 2013 + Test Bank: The General Securities Representative Examination

The go–to guide to acing the Series 7 Exam! The General Securities Representative Examination (Series 7) is an entry–level exam that qualifies individuals for registration with all self–regulatory organizations to trade, promote, and sell all forms of general securities. This intense six–hour test is the must–pass exam for aspiring financial professionals. The exam consists of 250 questions about everything from stocks and stock markets, government securities, municipal and corporate bonds, and options to rules for acquiring customers and handling their accounts, general economic theory, and the rules and regulations of the Securities and Exchange Commission. Created by the experts at The Securities Institute of America, Inc., Wiley Series 7 Exam Review 2013 arms you with what you need to score high on the test and pass the Series 7 Exam. Designed to let you build and fine–tune your knowledge of all areas covered and guarantee that you?re prepared mentally and strategically to take the test, it provides: Hundreds of examples 542 practice questions covering each subject area in the exam Priceless test–taking tips and strategies Helpful hints on how to study for the test, manage stress, and stay focused Wiley Series 7 Exam Review 2013 is your ticket to passing the test with flying colors—on the first try—and becoming a registered General Securities Representative. Visit www.wileysecuritieslicensing.com for more information. The Securities Institute of America, Inc., helps thousands of securities and insurance professionals build successful careers in the financial services industry every year. Our securities training options include: Onsite classes Private tutoring Classroom training Interactive online video training classes State–of–the–art exam preparation software Printed textbooks Real–time tracking and reporting for managers and training directors As a result, you can choose a securities training solution that matches your skill level, learning style, and schedule. Regardless of the format you choose, you can be sure that our securities training courses are relevant, tested, and designed to help you succeed. It is the experience of our instructors and the quality of our materials that make our courses requested by name at some of the largest financial services firms in the world. To contact The Securities Institute of America, visit us on the web at www.SecuritiesCE.com or call 877–218–1776. INDICE: ABOUT THE SERIES 7 EXAM XXI ABOUT THIS BOOK XXV ABOUT THE TEST BANK XXVI ABOUT THE SECURITIES INSTITUTE OF AMERICA XXVII CHAPTER 1 EQUITY SECURITIES 1 What Is a Security? 1 Equity = Stock 2 Common Stock 2 Preferred Stock 14 Currency Risks 22 Functions of the Custodian Bank Issuing ADRs 22 Real Estate Investment Trusts (REITs) 23 Pretest 25 CHAPTER 2 DEBT SECURITIES 29 Corporate Bonds 29 Types of Bond Issuance 30 Bond Certificate 31 Bond Pricing 31 Corporate Bond Pricing 32 Bond Yields 32 Bond Maturities 36 Types of Corporate Bonds 37 Converting Bonds into Common Stock 40 Advantages of Issuing Convertible Bonds 41 Disadvantages of Issuing Convertible Bonds 41 Convertible Bonds and Stock Splits 42 The Trust Indenture Act of 1939 42 Bond Indenture 42 Ratings Considerations 42 Retiring Corporate Bonds 43 Collateralized Mortgage Obligation (CMO) 45 CMOs and Interest Rates 45 Types of CMOs 46 Private–Label CMOs 47 Exchange–Traded Notes (ETNs) 48 Pretest 49 CHAPTER 3 GOVERNMENT SECURITIES 53 Series EE Bonds 53 Series HH Bonds 54 Treasury Bills, Notes, and Bonds 54 Treasury Bond and Note Pricing 55 Treasury Strips 56 Treasury Receipts 56 Treasury Inflation–Protected Securities (TIPS) 57 Agency Issues 57 Government National Mortgage Association (GNMA) 57 Federal National Mortgage Association (FNMA) 58 Federal Home Loan Mortgage Corporation (FHLMC) 58 Federal Farm Credit System (FFCS) 58 Pretest 61 CHAPTER 4 MUNICIPAL SECURITIES 63 Municipal Bonds 63 Types of Municipal Bonds 64 Issuing Municipal Securities 68 Selecting an Underwriter 68 Creating a Syndicate 69 Syndicate Accounts 70 Submitting the Syndicate Bid 71 Determining the Reoff ering Yield 71 Awarding the Issue 72 Underwriter’s Compensation 72 Order Period 74 Allocation Municipal Bond Orders 74 Sale Date 75 When Issued Confirmations 76 Final Confirmations 76 Other Types of Municipal Underwritings 77 Syndicate Operation and Settlement 77 The Official Statement 78 Bond Counsel 79 The Legal Opinion 79 Potential Conflicts of Interest for Municipal Bond Underwriters 80 Acting as a Financial Adviser to the Issuer 80 Information Obtained While Acting as a Fiduciary 80 Acting as a Financial Adviser and an Underwriter 81 Municipal Bond Trading 81 Bona Fide Quotes 82 Informational Quotes 82 Out Firm Quotes 83 Executing a Customer’s Municipal Bond Orders 83 Customer Confirmations 84 Yield Disclosure 85 Sources of Municipal Bond Market Information 86 Recommending Municipal Bonds 86 Taxation of Municipal Bonds 87 Tax Equivalent Yield 87 Purchasing a Municipal Bond Issued in the State in which the Investor Resides 88 Triple Tax Free 88 Original Issue Discount (OID) and Secondary Market Discounts 88 Amortization of a Municipal Bond’s Premium 89 Bond Swaps 89 Analyzing Municipal Bonds 89 Analyzing General Obligation Bonds 90 The Debt Statement 90 Community Factors 91 Sources of Tax Revenue 92 Determining Property Taxes 92 Important Financial Ratios for General Obligation Bonds 93 Analyzing Revenue Bonds 93 Types of Revenue Pledge 93 Municipal Securities Rulemaking Board (MSRB) 94 Pretest 99 CHAPTER 5 MONEY MARKET 105 Money Market Instruments 105 Corporate Money Market Instruments 105 Government Money Market Instruments 107 Municipal Money Market Instruments 108 International Money Market Instruments 108 Interest Rates 108 Pretest 111 CHAPTER 6 ECONOMIC FUNDAMENTALS 113 Gross Domestic Product (GDP) 113 Recession 115 Depression 115 Economic Indicators 115 Economic Policy 117 Tools of The Federal Reserve Board 117 Fiscal Policy 120 Consumer Price Index (CPI) 121 Inflation/Defl ation 121 Real GDP 121 International Monetary Considerations 122 Pretest 123 CHAPTER 7 OPTIONS 127 Option Classification 127 Option Classes 128 Option Series 128 Bullish vs. Bearish 128 Possible Outcomes for an Option 129 Characteristics of All Options 130 Managing an Option Position 130 Buying Calls 131 Selling Calls 132 Buying Puts 134 Selling Puts 135 Option Premiums 137 At the Money Options 137 Out of the Money Options 138 Intrinsic Value and Time Value 138 Using Options as a Hedge 139 Long Stock Long Puts/Married Puts 139 Long Stock Short Calls/Covered Calls 141 Maximum Gain Long Stock Short Calls 142 Maximum Loss Long Stock Short Calls 143 Short Stock Long Calls 143 Maximum Gain Short Stock Long Calls 144 Maximum Loss Short Stock Long Call 145 Short Stock Short Puts 145 Maximum Gain Short Stock Short Puts 146 Maximum Loss Short Stock Short Puts 147 Multiple Option Positions and Strategies 148 Long Straddles 148 Short Straddles 150 Spreads 152 Combinations 163 Using a T Chart to Evaluate Option Positions 164 Index Options 168 Interest Rate Options 170 Price–Based Options 170 Rate–Based Options 172 Foreign Currency Options 172 The Option Clearing Corporation 174 The Options Markets 175 The Chicago Board Option Exchange 175 Opening and Closing Option Prices 177 Order Execution 177 Expiration and Exercise 178 American vs. European Exercise 178 Position and Exercise Limits 179 Stock Splits and Stock dividends 179 Taxation of Options 180 Closing an Option Position 180 Exercising a Call 180 Exercising a Put 181 Protective Puts 181 Covered Calls 181 Option Compliance 181 Option Agreement 181 Pretest 183 CHAPTER 8 MUTUAL FUNDS 189 Investment Company Philosophy 189 Types of Investment Companies 190 Open–End vs. Closed–End Funds 191 Diversified vs. Nondiversifi ed 192 Investment Company Registration 193 Investment Company Components 195 Mutual Fund Distribution 197 Selling Group Member 197 Distribution of No–Load Mutual Fund Shares 198 Distribution of Mutual Fund Shares 198 Mutual Fund Prospectus 198 Characteristics of Open–End Mutual Fund Shares 199 Mutual Fund Investment Objectives 200 Other Types of Funds 202 Bond Funds 202 Valuing Mutual Fund Shares 204 Changes in the NAV 205 Sales Charges 205 Calculating a Mutual Fund’s Sales Charge Percentage 207 Finding the Public Offering Price 208 Sales Charge Reductions 208 Breakpoint Schedule 209 Letter of Intent 209 Backdating a Letter of Intent 210 Breakpoint Sales 210 Rights of Accumulation 210 Automatic Reinvestment of Distributions 211 Other Mutual Fund Features 211 Cost Base of Multiple Purchases 215 Purchasing Mutual Fund Shares 216 Sales Charges 219 45–Day Free Look 219 Withdrawal Plans 219 Pretest 221 CHAPTER 9 VARIABLE ANNUITIES 227 Annuities 227 Equity Indexed Annuity 230 Annuity Purchase Options 231 Accumulation Units 231 Annuity Units 232 Annuity Payout Options 232 Factors Affecting the Size of the Annuity Payment 233 The Assumed Interest Rate (AIR) 233 Taxation 234 Types of Withdrawals 234 Annuitizing the Contract 235 Expenses and Guarantees 235 Other Charges 236 Pretest 237 CHAPTER 10 ISSUING CORPORATE SECURITIES 241 The Securities Act of 1933 241 The Prospectus 242 The Final Prospectus 242 Prospectus to Be Provided to Aftermarket Purchasers 243 SEC Disclaimer 243 Misrepresentations 243 Tombstone Ads 244 Free Riding and Withholding/FINRA Rule 5130 244 Underwriting Corporate Securities 245 Types of Underwriting Commitments 246 Types of Off erings 247 Awarding the Issue 248 The Underwiting Syndicate 248 Selling Group 248 Underwriter’s Compensation 248 Private Placements/Regulation D Off erings 251 Rule 144 251 Regulation A Offerings 252 Rule 145 253 Rule 147 Intrastate Offering 253 Pretest 255 CHAPTER 11 TRADING SECURITIES 259 Types of Orders 259 The Exchanges 263 Priority of Exchange Orders 263 The Role of The Specialist/DMM 263 The Specialist/DMM Acting as a Principal 264 The Specialist/DMM Acting as an Agent 264 Crossing Stock 266 Do Not Reduce (DNR) 267 Adjustments for Stock Splits 267 Stopping Stock 268 Commission House Broker 269 Two–Dollar Broker 269 Registered Traders 269 Super Display Book (SDBK) 269 Short Sales 270 Rule 200 Definitions and Order Marking 270 Rule 203 Security Borrowing and Delivery Requirements 271 Threshold Securities 272 Listing Requirements for the NYSE 273 Over the Counter/Nasdaq 274 Market Makers 274 Nasdaq Subscription Levels 275 Nasdaq Quotes 275 Nominal Nasdaq Quotes 276 Automated Confi rmation System (ACT)/Trade Reporting Facility (TRF) 276 Nasdaq Execution Systems 277 The Nasdaq Market Center Execution System (NMCES) 277 The Nasdaq Opening Cross 277 Non–Nasdaq OTCBB 278 Pink Sheets 278 Third Market 278 Fourth Market 279 Reading the Consolidated Tape 279 Exchange Qualifi ers 281 Broker vs. Dealer 281 FINRA 5% Markup Policy 281 Markups/Markdowns When Acting as a Principal 282 Riskless Principal Transactions 283 Proceeds Transactions 284 The Order Audit Trail System (OATS) 284 Trade Reporting and Compliance Engine (TRACE) 284 Circuit Breakers 285 Arbitrage 286 Pretest 287 CHAPTER 12 CUSTOMER ACCOUNTS 291 Holding Securities 293 Mailing Instructions 294 Types of Accounts 294 Commingling Customer’s Pledged Securities 304 Wrap Accounts 304 Regulation S–P 304 Pretest 305 CHAPTER 13 MARGIN ACCOUNTS 309 Regulation of Credit 309 Regulation T 309 House Rules 312 Establishing a Long Position in a Margin Account 312 An Increase in the Long Market Value 313 Special Memorandum Account (SMA) Long Margin Account 315 A Decrease in the Long Market Value 317 Minimum Equity Requirement Long Margin Accounts 317 Establishing a Short Position in a Margin Account 318 A Decrease in the Short Market Value 319 Special Memorandum Account (SMA) Short Margin Account 320 An Increase in the Short Market Value 321 Minimum Equity Requirement Short Margin Accounts 322 Combined Margin Accounts 323 Portfolio Margin Accounts 323 Margin Accounts 325 CHAPTER 14 RETIREMENT PLANS 329 Individual Plans 329 Individual Retirement Accounts (IRAs) 330 Traditional IRAs 330 Roth IRAs 331 Simplified Employee Pension IRA (SEP IRA) 332 Educational IRA/Coverdell IRA 334 Tax–Sheltered Annuities (TSAs)/Tax–Deferred Accounts (TDAs) 336 Corporate Plans 338 Rolling Over a Pension Plan 340 Employee Retirement Income Security Act of 1974 (ERISA) 341 Pretest 343 CHAPTER 15 BROKERAGE OFFICE PROCEDURE 347 Executing an Order 347 Customer Confirmations 349 Clearly Erroneous Reports 350 Execution Errors 350 Corporate and Municipal Securities Settlement Options 350 RVP/DVP/COD 351 When–Issued Securities 351 Government Securities Settlement Options 351 Accrued Interest 352 Calculating Accrued interest 352 Accrued Interest for Government Notes and Bonds 354 Rules for Good Delivery 355 Delivery of Round Lots 355 Delivery of Bond Certifi cates 356 Rejection of Delivery 356 Don’t Know (DK) Procedures 357 Fail to Deliver/Fail to Receive 357 Due Bills 357 Customer Account Statements 357 Carrying of Customer Accounts 358 Proxies 359 Pretest 361 CHAPTER 16 FUNDAMENTAL AND TECHNICAL ANALYSIS 367 Fundamental Analysis 367 The Balance Sheet 368 Industry Fundamentals 375 Technical Analysis 376 Market Theories and Indicators 379 Efficient Market Theory 380 Pretest 381 CHAPTER 17 DIRECT PARTICIPATION PROGRAMS 383 Limited Partnerships 383 Structuring and Off ering Limited Partnerships 385 Types of Limited Partnerships 386 Oil and Gas Sharing Arrangements 388 Equipment Leasing Programs 388 Tax Reporting for Direct Participation Programs 389 Limited Partnership Analysis 389 Tax Deductions vs. Tax Credits 390 Other Tax Considerations 390 Dissolving a Partnership 390 Pretest 391 CHAPTER 18 CUSTOMER RECOMMENDATIONS, PROFESSIONAL CONDUCT, AND TAXATION 395 Professional Conduct in the Securities Industry 396 Fair Dealings with Customers 396 Periodic Payment Plans 401 Mutual Fund Current Yield 401 Information Obtained from an Issuer 401 Disclosure of Client Information 402 Borrowing and Lending Money 402 Gift Rule 402 Outside Employment 402 Private Securities Transactions 403 Customer Complaints 403 Investor Information 403 NYSE/FINRA Know Your Customer 404 Investment Objectives 405 Risk vs. Reward 407 Alpha 408 Beta 409 Tax Structure 409 Investment Taxation 409 Calculating Gains and Losses 410 Cost Base of Multiple Purchases 410 Deducting Capital Losses 411 Wash Sales 411 Taxation of Interest income 412 Inherited Securities 412 Donating Securities to Charity 413 Gift Taxes 413 Estate Taxes 413 Withholding Tax 413 Corporate Dividend Exclusion 414 Alternative Minimum Tax (AMT) 414 Taxes on Foreign Securities 414 Pretest 415 CHAPTER 19 SECURITIES INDUSTRY RULES AND REGULATIONS 421 The Securities Exchange Act of 1934 421 The Securities and Exchange Commission (SEC) 422 Extension of Credit 423 The National Association of Securities Dealers (NASD) 423 Becoming a Member of FINRA 425 Registration of Agents/Associated Persons 425 Disciplinary Actions Against a Registered Representative 426 Resignation of a Registered Representative 426 Termination for Cause 427 Retiring Representatives/Continuing Commissions 427 State Registration 427 Registration Exemptions 428 Persons Ineligible to Register 428 Communications with the Public 428 FINRA Rule 2210 Communications with the Public 429 Broker Dealer Websites 432 Blind Recruiting Ads 432 Generic Advertising 433 Tombstone Ads 433 Testimonials 434 Free Services 434 Misleading Communication with the Public 434 Securities Investor Protection Corporation Act of 1970 434 Net Capital Requirement 435 Customer Coverage 435 Fidelity Bond 436 The Securities Acts Amendments of 1975 436 The Insider Trading & Securities Fraud Enforcement Act of 1988 436 Firewall 437 The Telephone Consumer Protection Act of 1991 437 Exemption from the Telephone Consumer Protection Act of 1991 438 The Penny Stock Cold Call Rule 438 The Role of the Principal 439 Violations and Complaints 439 Resolution of Allegations 439 Minor Rule Violation 440 Code of Arbitration 440 The Arbitration Process 441 Mediation 442 Currency Transactions 442 The Patriot Act 443 U.S. Accounts 443 Foreign Accounts 444 Annual Compliance Review 444 Business Continuity Plan 444 Sarbanes–Oxley Act 444 The Uniform Securities Act 446 Pretest 447 ANSWER KEYS 453 GLOSSARY OF EXAM TERMS 471 INDEX 537

• ISBN: 978-1-118-67270-9
• Editorial: John Wiley & Sons
• Encuadernacion: Rústica
• Páginas: 576
• Fecha Publicación: 13/08/2013
• Nº Volúmenes: 1
• Idioma: Inglés