SERIES 65 UPDATED EXAMS SCRIPT QUESTIONS
AND ANSWERS SURE A+
✔✔Simplified Employee Pension Plan (SEP) - ✔✔...
✔✔direct participation program (DPP) - ✔✔1. a business venture designed to let
investors participate directly in the cash flow and tax benefits of the underlying
investment.
2. DPPs are generally passive investments that invest in real estate or energy-related
ventures usually organized as a limited partnership, a subchapter S corporation or a
general partnership.
✔✔Wrap accounts - ✔✔1. an account in which a brokerage manages an investor's
portfolio for a flat quarterly or annual fee, usually 1-3%, of your account's assets that
covers all administrative, commission, and management expenses.
2. protects you from excessive trading by your broker to make more commission.
3. A traditional wrap typically requires an initial investment of at least $25,000. Mutual
fund wraps have relatively smaller investment minimums of as low as $2,000.
4. are great if you don't have time to invest on your own and wish to have a money
manager take care of your assets.
✔✔1. ECONOMIC FACTORS AND BUSINESS INFORMATION - ✔✔...
✔✔Gross National Product (GNP) - ✔✔-the value of goods and services produced by a
country's citizens whether they produced these items within its borders or not.
-Used by US until 1991
✔✔Gross Domestic Product (GDP) - ✔✔-the value of goods and services produced
within a country's borders.
-GDP = C + G + I + NX
C = consumer spending
G = government spending
,I = total investments (incl. businesses capital expenditures)
NX = nation's total net exports (Exports - Imports)
✔✔Recession - ✔✔2 consecutive quarters of decline (contraction) in the GDP
✔✔Depression - ✔✔6 consecutive quarters of decline (contraction) in the GDP
✔✔Leading Indicators - ✔✔used to forecast the ups and downs of the business cycle in
the next 3-12 months:
-worker's avg work week hours
-building permits
-stock prices (S&P 500)
-the money supply
-the index of consumer expectations
✔✔U.S. Stock Market Crashes Since 1929 - ✔✔1. October 24, 1929
Also called the Great Crash or the Wall Street Crash, leading to the Great Depression.
2. Recession of 1937-38
3. May 28, 1962
The Kennedy Slide of 1962, also known as the Flash Crash of 1962
3.October 19, 1987
Black Monday
4. July 1990
Recession of 1990
5. March 10, 2000
The collapse of the Dot-com bubble.
6. September 11, 2001
7. October 9. 2002
The Stock Market Downturn of 2002
8. September 16, 2008
The Financial crisis of 2007-08
9. May 6, 2010
The Flash Crash of 2010
10. Aug 1, 2011
August 2011 Stock Market Fall
✔✔Coincident Indicators - ✔✔move at the same cycle as current economic cycle we're
in:
-industrial production
-# of employees on payroll (non-agricultural)
✔✔Lagging Indicators - ✔✔typically lag is a few quarters of a year:
-unemployment rate/claims
-business spending
-change in CPI from previous months
, ✔✔Monetary Policy - ✔✔set by the Federal Reserve Board to control money supply
thru:
1. Reserve requirements
2. Discount rate
3. Buy/sell US gov't securities
(influences the Prime rate)
✔✔Federal Discount Rate
(most important tool after reserve requirements) - ✔✔The interest rate charged banks
for loans received from the Federal Reserve Bank's discount window; set by the Federal
Reserve Banks, rather than a market rate of interest.
✔✔Federal funds rate - ✔✔overnight interest rate banks lend reserve balances to other
banks
✔✔Regulation T
(margin requirements) - ✔✔the percentage of money required to be on deposit for
margin accounts (50%)
✔✔LIBOR (London Interbank Offered Rate) - ✔✔1. rate at which banks lend to other
banks in the London wholesale money market and around the world.
2. Many US mortgages use 6-month LIBOR as an index
3. set by the BBA (British Banking Association) and includes representatives from 16
banks
4. Total of 35 different LIBOR rates each business day but the most commonly quoted
rate is the 3-month U.S. dollar rate.
✔✔Fiscal Policy - ✔✔set by Congress to control money supply thru:
1. raise/lower taxes
2. gov't spending
✔✔Normal Yield curve - ✔✔Typically when short-term interest rates are lower than
long-term rates, so the yield curve slopes upwards, reflecting higher yields for longer-
term investments.
✔✔Flat Yield curve - ✔✔When the spread between short-term and long-term interest
rates narrows; often seen during the transition from a normal yield curve to an inverted
one.
✔✔Inverted "negative" Yield curve - ✔✔When long-term interest rates are lower than
short-term rates, so the yield curve slopes downwards, reflecting higher yields for short-
term investments.
✔✔Balance of Trade - ✔✔the export of goods and services less imports
AND ANSWERS SURE A+
✔✔Simplified Employee Pension Plan (SEP) - ✔✔...
✔✔direct participation program (DPP) - ✔✔1. a business venture designed to let
investors participate directly in the cash flow and tax benefits of the underlying
investment.
2. DPPs are generally passive investments that invest in real estate or energy-related
ventures usually organized as a limited partnership, a subchapter S corporation or a
general partnership.
✔✔Wrap accounts - ✔✔1. an account in which a brokerage manages an investor's
portfolio for a flat quarterly or annual fee, usually 1-3%, of your account's assets that
covers all administrative, commission, and management expenses.
2. protects you from excessive trading by your broker to make more commission.
3. A traditional wrap typically requires an initial investment of at least $25,000. Mutual
fund wraps have relatively smaller investment minimums of as low as $2,000.
4. are great if you don't have time to invest on your own and wish to have a money
manager take care of your assets.
✔✔1. ECONOMIC FACTORS AND BUSINESS INFORMATION - ✔✔...
✔✔Gross National Product (GNP) - ✔✔-the value of goods and services produced by a
country's citizens whether they produced these items within its borders or not.
-Used by US until 1991
✔✔Gross Domestic Product (GDP) - ✔✔-the value of goods and services produced
within a country's borders.
-GDP = C + G + I + NX
C = consumer spending
G = government spending
,I = total investments (incl. businesses capital expenditures)
NX = nation's total net exports (Exports - Imports)
✔✔Recession - ✔✔2 consecutive quarters of decline (contraction) in the GDP
✔✔Depression - ✔✔6 consecutive quarters of decline (contraction) in the GDP
✔✔Leading Indicators - ✔✔used to forecast the ups and downs of the business cycle in
the next 3-12 months:
-worker's avg work week hours
-building permits
-stock prices (S&P 500)
-the money supply
-the index of consumer expectations
✔✔U.S. Stock Market Crashes Since 1929 - ✔✔1. October 24, 1929
Also called the Great Crash or the Wall Street Crash, leading to the Great Depression.
2. Recession of 1937-38
3. May 28, 1962
The Kennedy Slide of 1962, also known as the Flash Crash of 1962
3.October 19, 1987
Black Monday
4. July 1990
Recession of 1990
5. March 10, 2000
The collapse of the Dot-com bubble.
6. September 11, 2001
7. October 9. 2002
The Stock Market Downturn of 2002
8. September 16, 2008
The Financial crisis of 2007-08
9. May 6, 2010
The Flash Crash of 2010
10. Aug 1, 2011
August 2011 Stock Market Fall
✔✔Coincident Indicators - ✔✔move at the same cycle as current economic cycle we're
in:
-industrial production
-# of employees on payroll (non-agricultural)
✔✔Lagging Indicators - ✔✔typically lag is a few quarters of a year:
-unemployment rate/claims
-business spending
-change in CPI from previous months
, ✔✔Monetary Policy - ✔✔set by the Federal Reserve Board to control money supply
thru:
1. Reserve requirements
2. Discount rate
3. Buy/sell US gov't securities
(influences the Prime rate)
✔✔Federal Discount Rate
(most important tool after reserve requirements) - ✔✔The interest rate charged banks
for loans received from the Federal Reserve Bank's discount window; set by the Federal
Reserve Banks, rather than a market rate of interest.
✔✔Federal funds rate - ✔✔overnight interest rate banks lend reserve balances to other
banks
✔✔Regulation T
(margin requirements) - ✔✔the percentage of money required to be on deposit for
margin accounts (50%)
✔✔LIBOR (London Interbank Offered Rate) - ✔✔1. rate at which banks lend to other
banks in the London wholesale money market and around the world.
2. Many US mortgages use 6-month LIBOR as an index
3. set by the BBA (British Banking Association) and includes representatives from 16
banks
4. Total of 35 different LIBOR rates each business day but the most commonly quoted
rate is the 3-month U.S. dollar rate.
✔✔Fiscal Policy - ✔✔set by Congress to control money supply thru:
1. raise/lower taxes
2. gov't spending
✔✔Normal Yield curve - ✔✔Typically when short-term interest rates are lower than
long-term rates, so the yield curve slopes upwards, reflecting higher yields for longer-
term investments.
✔✔Flat Yield curve - ✔✔When the spread between short-term and long-term interest
rates narrows; often seen during the transition from a normal yield curve to an inverted
one.
✔✔Inverted "negative" Yield curve - ✔✔When long-term interest rates are lower than
short-term rates, so the yield curve slopes downwards, reflecting higher yields for short-
term investments.
✔✔Balance of Trade - ✔✔the export of goods and services less imports
