Flashcards
A horizontal spread is either the purchase and sale of two calls or two puts with different expiration months (same class, same strike).
Services to provide comfort and support for persons in the last stages of a terminal illness and their families.
Care in a hospital that usually doesn’t require an overnight stay.
Hot storage is a method of storing crypto that uses services connected to the internet to store cryptocurrency keys.
Broker/dealers may have higher ongoing margin requirements than FINRA rules require. These higher requirements are called house requirements.
The human life value approach looks at how much income the person is expected to generate over their life and determines a face value based on that amount.
Hypothecation is when the client pledges their margin securities as collateral for the loan. Brokerage firms re-hypothecate clients’ securities to a bank to finance the margin accounts.
NASAA passed a model rule that allows for states to adopt a continuing education requirement for investment adviser representatives. The continuing education requirement includes 12 hours of CE to be completed annually, by December 31st. Of those 12 hours 6 hours must be in the area of Products and Practices, and 6 hours must be in the area of Ethics and Professional Responsibility (with 3 of those 6 specific to ethics).
An immediate annuity is an annuity contract that is purchased for a lump sum (single premium) and starts to pay out in monthly payments the month immediately following its purchase.
An immediate annuity is funded with a single premium. The monthly payments begin one month after funding.
An impairment rider, also known as an exclusion rider, is an attachment to an insurance policy that excludes or limits coverage for a specific health condition or pre-existing medical condition.
Impersonal investment advice is advice that does not purport to meet the needs of any specific client, but that is general in nature.
Implied authority refers to the actions of an agent (producer) that may extend beyond the rights and powers explicitly provided in the agency contract.
In-the-money is the term used to describe an option that can be exercised by the owner. In-the-money options have intrinsic value. A call is in-the-money when the market price is above the strike and a put is in-the-money when the market price is below the strike.
An incentive stock option is a type of stock option that a business may make available to its employees. An ISO has preferential tax treatment, if the stock purchased is held for a minimum of two years after the date of grant and one year after the date of exercise, profits are taxed at long-term rates. ISOs are also called qualified stock options.
An income bond is a bond issued by a corporation that is experiencing financial difficulties. The income bond will only pay interest if the board of directors believes the company can afford to. Income bonds are also called adjustment bonds. Income bonds trade flat, without accrued interest
An income fund is a type of mutual fund that seeks to provide a stable current income from investments by investing in securities that pay higher-than-average yields.
The income statement is a financial statement that shows the income and expenses of a business or an individual, over a period of time. The income statement is also called a profit and loss.
A provision that places a time limit – up to two years – on a life insurance company´s right to deny payment of a claim because of a material misrepresentation on your application.
Indemnity is the process by which loss responsibility is explicitly transferred within a contractual relationship. Without this, there’s no way for an insurance policy to establish that accountability – meaning there would be no way to enforce its provided protections.
An indenture is a formal agreement between an issuer of bonds and the bondholder. The indenture provides for the appointment of a trustee to act on behalf of the bondholders, in accordance with the Trust Indenture Act of 1939. The indenture will cover such considerations as the form of the bond, amount of the issue, property pledged (if not a debenture), protective covenants including any provision for a sinking fund, working capital, and current ratio, and redemptions rights or call privileges.
An index fund is one in which the portfolio of the fund mirrors the holdings of an index. It is a passive type of investment since it is not actively managed. Index funds have low management fees.
A fixed annuity contract in which its values are based on a crediting index, such as the Standard & Poor’s 500 Index.
A whole life plan of insurance that provides for the face amount of the policy and, correspondingly, the premium rate, to automatically increase every year based on an increase in the Consumer Price Index (CPI) or another index as defined in the policy.
An indication of interest is an investor’s expression of conditional interest in buying a forthcoming securities issue after the investor has reviewed a preliminary prospectus. An indication of interest is not a commitment to buy.
An individual retirement plan (IRA) is available to anyone with earned income. There are two types of IRAs, traditional and Roth. A Roth IRA may only be funded by individuals with earned income, who do not earn too much (phaseout varies each year). Roth IRAs are always funded with after tax dollars. If a distribution is made from a Roth that has been open for a minimum of 5 years and that is paid out on or after age 59 ½, the earnings are tax-free. A traditional IRA may be funded by anyone with earned income. The contributions made into a traditional IRA may or may not be tax-deductible, depending upon the client’s situation and current tax code. Traditional IRAs are subject to the required minimum distribution rules. Earnings in a traditional IRA are taxable as ordinary income upon withdrawal.
An industrial development bond is a type of municipal revenue bond issue, with the municipality using the proceeds to finance the construction of industrial facilities to be leased or purchased by private companies. The bonds are backed by the credit of the private companies and often are not considered an obligation of the issuing municipality. Interest paid on an industrial development revenue bond may or may not be tax exempt, depending upon if the issue is best for the public or the private company.
Inflation is a general rise in prices. One of the root causes of inflation is too many dollars chasing too few of goods.
Inflation risk is a type of systematic investment risk. Fixed income investments have inflation risk. Inflationary risk is also called purchasing power risk. Inflationary risk may only be reduced with asset class diversification.
The initial margin requirement is set by Federal Reserve Board Regulation T. Currently, it is 50% of the value being purchased, or $2,000, whichever is greater, not to exceed the market value of the securities being purchased.
In an initial public offering shares of stock are sold for the very first time to the general public. Shares in an IPO are sold at a fixed price in the primary market, one time only. After the shares trade in the primary market, they will trade in the secondary market at a price set by the market.
An injunction is a court order requiring a person to either do or not do a specific act. If a person has been issued an injunction and he or she fails to meet the requirements of the order, they may be held in contempt of court.
Inside information is material information that is not known by the general public that if known would affect the stock price.
The inside market is the difference between the bid and the ask in the over-the-counter market. The closer the two prices are, the more active the issue.
An insider includes any person who has material nonpublic information about a publicly traded company. According to the l934 Act, directors, officers, and stockholders who own at least 10% of any class of equity security issued by the corporation are all considered insiders.
An institutional account is an account held for the benefit of others. Institutional accounts include banks, pension plans, insurance companies, mutual fund companies, and profit sharing plans.
An institutional communication is a written communication (including electronic) that is distributed or made available to only institutional investors, not to retail investors. The term institutional communication does not include a firm’s internal communications.
Institutional investors include broker-dealers, banks, pension plans, insurance companies, mutual fund companies, profit sharing plans, and any entity with $50 million or more in total assets. Most regulations are written to protect retail investors and not written towards institutional investors, with the belief that institutional clients should know what they are doing.
For persons related by blood, a substantial interest established through love and affection, and for all other persons, a lawful and substantial economic interest in having the life of the insured continue. An insurable interest is required when purchasing life insurance on another person.
Insurance is a legal agreement between two parties – the insurer and the insured, also known as insurance coverage or insurance policy. The insurer provides financial coverage for the losses of the insured that s/he may bear under certain circumstances.
The laws that govern the business of insurance in a state.
The person or organization covered by an insurance policy.
The insurance company.
The insuring clause is found on the first page of the policy, the face of the policy. It is the insurer’s legally enforceable promise to pay. The insuring clause includes the parties to the contract, the policy effective date, and the coverage.
Intangible assets are assets of a business that do not have a physical quality, but they do have value. Intangible assets include goodwill, intellectual property, and patents pending.
Interactive content is a social media format that allows for input from both the creator and the viewer.
Interest is the charge for the borrowing of money, usually expressed as an annual percentage rate.
Interest rate risk is the risk that the cost of borrowing money will change over time. This term is generally associated with bond prices, but it applies to all investments. In the bond market, it is the bond’s market price that has interest risk. If interest rates in the market change, relative to the nominal yield on the bond, the bond’s market price will move in an inverse direction. Interest rate risk is a type of risk that is systematic and cannot be avoided by diversification. Diversification by asset class would help to reduce interest rate risk.
The Investment Company Act of l940 requires that at least 40% of the board of directors remain independent from the operations of the investment company. The law states that no more than 60% of the directors may also hold an affiliated position within the fund (an affiliated position would be a director who is also the fund’s investment adviser, custodian, etc).
The internal rate of return on a bond is the bond’s yield to maturity. The internal rate of return is the discount rate at which the future dollars created when discounted back to their present value minus the initial cost outlay is equal to zero.