Flashcards
The money market is the market where short-term debt issues trade. Money market instruments are forms of debt that mature in one year or less and are very liquid. Treasury bills make up the bulk of trading in the money market.
In the portfolio of a money market fund are short-term debt instruments, with a maximum maturity of one year. Money market funds are conservative investments. They attempt to maintain a stable NAV of $1 per share but do not guarantee it. Money market funds are good for investors looking for safety and liquidity. They pay very little income.
A Monte Carlo Simulation is a statistical method used to determine the most likely outcomes by assigning random values based on the risk and return characteristics for a specific security or a portfolio of securities.
Moody’s is a rating company. They rate bonds, commercial paper, preferred and common stock, and municipal short term debt. Moody’s rates consist of both uppercase and lowercase letters. Baa or higher are considered investment grade securities.
Hazard arising out of an insured’s character, habits, financial responsibilities, etc. A liar represents a moral hazard.
Moral obligation bonds occur when a state government, through its legislature, shows its intent to appropriate funds in the future if the primary obligor (municipality) defaults. With a moral obligation bond, the payment of interest and principal is not legally binding on the legislature.
Hazard arising out of an indifference to loss because of the existence of insurance. A careless person represents a morale hazard.
The incidence of death at each attained age; frequency of death.
The cost of the insurance protection based upon actuarial tables which are based upon the incidence of death, by age, among given groups of people. This cost is based on the amount at risk under the policy, the insured´s risk classification at the time of policy purchase, and the insured´s current age.
The mortality guarantee is part of a variable annuity contract under which the company agrees to continue annuity payments even if the annuitant lives longer than the mortality tables predicted.
Listing of the mortality experience of individuals by age. This table allows an actuary to calculate, on average, how long an individual will of a given age and gender may be expected to live.
The most common type of secured bond is a mortgage bond. A mortgage bond is a type of corporate debt that is backed by real estate collateral; land, or buildings owned by the corporation. In the event of a corporate liquidation, the land or buildings will be sold to pay off the mortgage bondholders.
A type of term life insurance that can pay off or reduce the balance owing on a real estate purchase or refinance mortgage. Death benefit amounts track with the balances due on the loans. Coverage may be available on a group basis through creditors or licensed agents (producers) on an individual basis.
In a property insurance policy, mortgagee rights are provisions that protect the interests of a mortgage lender (mortgagee) in the event of loss or damage to the mortgaged property.
Municipal bonds are debt issued by any district, authority, or government (state, county, city, township, and so on) other than the federal government. The debt is issued at face value, paying a stated interest rate semi-annually. Interest on municipal debt is federal income tax-free, but capital gains are taxable. If the investor purchases municipal debt issued in the same state that they live in then the interest is double-exempt, tax-free at both the state and federal levels.
The portfolio of a municipal bond fund consists of municipal bonds, offering the investor federally income tax free dividends.
Municipal Notes are short-term notes issued by municipalities in anticipation of taxes, bond issues, or revenues. They are issued for cash-flow purposes, as temporary financing for projects or payment of interest or principal. Municipal notes are secured by the general obligation pledge of the issuer.
The MSRB is the self-regulatory agency for the municipal securities industry. The MSRB has rule-making authority but does not have enforcement ability. MSRB rules are enforced by various regulatory agencies, including FINRA and the SEC.
An open end mutual fund is a type of management company that continuously offers new shares. The shares are redeemable and represent ownership in a pool of securities (the fund’s portfolio). The shares are redeemed at their next determined net asset value per share, within seven calendar days. Mutual funds must be sold with a prospectus. The prospectus will describe the costs associated with the fund and the fund’s investment objective.
An insurance company owned by its policyholders. Mutual insurance companies usually issue participating policies. The policyowners of participating policies may receive dividends.
When an investor sells a call and does not own the underlying security they are said to be naked. To sell a naked call exposes the investor to unlimited risk. Uncovered is used to describe selling an option on a security that the investor does not own.
NASDAQ, or the National Association of Securities Dealers Automated Quotation system, lists the bid and offering prices for the securities that are listed on the NASDAQ. Market makers enter their prices into this negotiated marketplace.
The association of state insurance Commissioners. They work together to solve insurance regulatory issues and form and recommend model legislation and requirements.
The NSCC is an organization that acts as the middleman between broker-dealers and exchanges.
It is the National Securities Markets Improvement Act of 1996 that created federally covered securities and federally covered advisers.
Negligence is failure to act as a reasonable person in the same set of circumstances. Negligence is a civil tort. It is grounds for a lawsuit.
A negotiable CD is sold by banks to institutional investors. They are money market instruments, with high face amounts. Negotiable CDs are backed by the FDIC, up to $250,000. They are sold at face value and pay semi-annual interest.
The over-the-counter market (OTC) is a negotiated market.
A fund’s total net asset value is calculated by subtracting fund liabilities from fund assets. The net asset value per share is the net value of the fund divided by the number of shares outstanding. NAV per share is also known as the bid price or redemption price.
Net capital requirements are how much in cash, and readily convertible into cash, the firm must maintain under customer protection laws. The SEC or state set net capital requirements for broker-dealers and investment advisers.
Net investment income of a mutual fund is the total dividends received from common and preferred stock held in the portfolio and all interest income received from bonds and other debt instruments. To this sum, any net short-term gains from trading securities are also added. The sum of dividends, interest, and short-term gains is the gross investment income of the fund. The fund will subtract expenses for operation (adviser’s fee, custodial fee, utilities, salaries, accounting costs, etc.). The result is net investment income. Dividends are paid from the net investment income of a mutual fund.
The net present value of an investment looks at the future dollars created, discounts them to their present value, then subtracts the cost of the initial investment. Net present value is a dollar amount, it is not a rate of return. A positive NPV is desirable. A negative NPV is not desirable. If the NPV is equal to zero, the discount rate being used is the investment’s internal rate of return.
A client’s assets minus their liabilities equals their net worth. For a business, the net worth is shareholders’ equity.
The facilities, providers, and suppliers a health insurer or plan have contracted with to provide health care services.
New clients must fill out a new account form. The new account form includes the name of the account owner, trading authorization, payment method, and types of securities appropriate for the customer.
A new issue is a security that is being sold to the public for the first time. A prospectus is required when selling a new issue.
A no-load fund is a mutual fund that does not impose a sales charge. In a no-load fund, the bid price is equal to the ask.
The nominal yield is the percentage return stated on the face of a bond. It is fixed from the date of issue. The nominal yield is also called the coupon rate. The nominal yield is the annual interest payment on a bond. Bonds pay interest semi-annually.
A policy that cannot be canceled by the insurer during the policy period.
A non-exempt security must be registered prior to sale.
These options apply to the cash value of a lapsed life insurance policy. Options available are to take the cash value in cash, use it to purchase extended term insurance, or reduced paid-up insurance.
Non-fungible tokens (NFTs) are digital assets that reside as code on a blockchain, often, but not exclusively, on the Ethereum blockchain. When an investor buys an NFT, they buy ownership of that particular bit of alphanumeric code associated with whatever has been tokenized. NFTs can be digital representations of artwork, a video, music, or even a tweet. Each NFT is minted by an issuer or creator and bought and sold in primary and secondary marketplaces, generally using cryptocurrency. Each NFT is unique, making the tokens “non-fungible,” meaning an investor can’t exchange one NFT for another just like it, as can be done with dollars or Bitcoin.
Generally, REITs are publicly traded on a financial exchange just like stocks; however, some REITs are not publicly listed. Because non-traded REITs are not traded in the secondary market, they are much more illiquid than their publicly listed counterparts. REITs that are not publicly listed are referred to as non-liquid or non-traded REITs. Non-traded REITs, although not publicly listed, must still be registered with the SEC. They also must still make regulatory filings as well, including quarterly and annual financial reports. Non-traded REITs have an expected investment life, typically 7-10 years.
Generally, REITs are publicly traded on a financial exchange just like stocks; however, some REITs are not publicly listed. Because non-traded REITs are not traded in the secondary market, they are much more illiquid than their publicly listed counterparts. REITs that are not publicly listed are referred to as non-liquid or non-traded REITs. Non-traded REITs, although not publicly listed, must still be registered with the SEC. They also must still make regulatory filings as well, including quarterly and annual financial reports. Non-traded REITs have an expected investment life, typically 7-10 years.
An insurance company that is not licensed to operate within a state. Surplus lines insurers are allowed to do business in a state without a license, they are nonadmitted insurers.
In a noncontributory plan, the employee does not pay any of the premium, the employer pays 100% of the premium. In a noncontributory group, the participation percentage is 100%. 100% of eligible employees must be enrolled.
Nonissuer transactions are secondary market transactions, shareholder to shareholder.
A life insurance policy that does not grant the policy owner the right to policy dividends. Nonparticipating policies are issued by stock insurers.
Nonqualified plans do not have to follow ERISA. Deferred compensation is an example of a nonqualified plan. Nonqualified plans are discriminatory.
Nonqualified plans do not follow ERISA. They are retirement plans offered to highly paid executives. Deferred compensation is a nonqualified plan.