Memorization Cheatsheet

Last updated Dec 10, 2022 Edit Source

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Think of this as a cheatsheet of the key things you’ll definitely want to remember by heart.

This exam is more like a law exam than a math exam, although there are some basic figures and formulas you’ll need to remember. We’ll list them all here, although this list is not guaranteed to be exhaustive.

If you’ve studied the exam well following the Test Prep Strategy Guide, then you should already be familiar with the items in this cheatsheet.

Use this list to scan and commit to short-term memory a few hours before the exam.

Study Tip

We recommend copy & pasting this to your own note-taking app or printing it out— whatever helps you!

Figures might be outdated

Most of these facts & figures are unlikely to change, but some might change over time, especially those related to specific regulations. Please check with a latest-edition textbook to see if these figures have been updated. Please use this page only as a guideline for the most important things to remember

• Default values of securities

  • Par value of a bond: $1,000 (unless otherwise stated)
    • Bonds are quotes I as a percentage of par. For example, a bond priced at 105 is worth $1,050 (or 105% of $1,000)
    • Bonds pay semi-annually
  • For preferred stock, par value is always $100 unless otherwise stated
  • Options are usually sold in blocks of 100 shares

• SIPC coverage

  • SIPC covers customers up to $500k per separate customer. (Of the $500k, only up to $250k in cash is covered).

• Exempt securities

  • Commercial Paper, Bankers’ Acceptance (BAs), or time drafts with maturities of less than 270 days (i.e. 9 months), sold in denominations exceeding $50,000, and receives a rating in one of the 3 highest rating categories from a nationally recognized statistical rating organization

• Rule 144 – Resale of Control & Restricted Securities:

  • Definition: Control securities are owned by “insiders”: officers, directors, and owners of 10% or more of the company’s outstanding stock
  • Ownership by any family members will be considered as well

• Substantial prepayment (6+ months in advance):

  • Federal: $1,200
  • State: $500

• IRA contribution limits (as of 2021) – combined for all IRAs:

  • $6,000 per year
  • $12,000 per couple
  • +$1,000 catchup for 50yo+
  • up to max of earned income that year

• Retirement plans
  • Maximum contributions for each retirement plan
  • Tax situation (before tax dollars, after tax dollars?)
  • Types of people that are eligible
• Net capital requirements for state-registered investment advisers
  • For advisers with no custody but with discretionary authority: $10k
  • For advisers with custody (whether with discretion or not): $35k
• Threshold for investment advisers to register with the state or with SEC
  • <$100M AUM: must register with the state unless one of the following exceptions apply:
  • $100M–$110M AUM: must choose between registering with the state or with the SEC
  • $110M+ AUM: must register with the SEC within 90 days of reaching $110M AUM
• Threshold for exemption from IA performance fees (“qualified client”)
  • Client has net worth of >$2.2mm
  • Client has >=$1.1mm AUM with the IA
  • Client is an officer/director of the IA, or one of their IARs. Must be in industry at least 1yr
• Surety Bond
  • Round up to nearest $5,000
• Recession vs Depression
  • 🔽 Recession = 2 consecutive quarters of declining Gross Domestic Product (GDP)
  • ⏬ Depression = 6 consecutive quarters of declining Gross Domestic Product (GDP)

• Timeline for registration, acceptance, filings, investigations, etc
  • Effective date of registration
    • Fed: 45th day
    • State: 30th day noon
  • Record keeping
    • Kept easily accessible: 2 years
    • BD: 3 years
    • IA: 5 years
  • File Form 13F: within 45 days of the end of each quarter
  • IA update ADV:
    • File ADV: 90 days after fiscal year end
    • Deliver ADV: 120 days after fiscal year end
  • IA AUM change
    • State → Fed: 90 days
    • Fed → State: 180 days
  • IA Withdraw (ADV-W)
    • Fed: 60 days
    • State: 30 days
• Timeline for administrative actions
  • Voluntary withdrawal of registration: effective in 30 days
  • Appeal administrative order within: 60 days
  • Summary Order hearing can be requested: 15 days after receipt
  • Right of Recission: must be accepted/rejected by buyer within 30 days
  • Statute of limitations:
    • Fed: 3 years, 1 year from discovery – whichever is earliest
    • State: 3 years, 2 years from discovery – whichever is earliest
  • Timeline for IRA distributions. Traditional IRA accountholders must start taking money out by the time they are 72 . Once they turn 72, they have until April 1st of the following year to take out at least the required minimum distribution

• Alpha
  • Depends on whether risk-free rate is given in the question
  • If risk-free rate is not given:
    • (Actual Return) – (Beta × Market Return)
  • If risk-free rate is given:
    • (Actual Return – Risk Free Rate) – (Beta × (Market Return – RF))
• Current Yield for Bonds
  • Current Yield = Annual Interest / Market Price
• Current Yield for Stocks
  • Current Yield = Annual Dividend / Market Price
• Convertible Bonds
  • Number of shares for conversion, when converting a convertible bond
    • Number of Shares for Conversion = Par Value / Conversion Price
  • Conversion parity price
    • Parity Price = Market Value of Bond / Conversion Ratio
• Time Value of Money
  • Present Value and Future Value
• After-Tax Return
  • This calculation lets you go from taxable yield to the tax-free equivalent
  • Taxable yield * (100% - tax bracket)
• Tax-Equivalent Yield
  • This calculation lets you go from tax-free yield to the taxable equivalent
  • Taxable yield / (100% - tax bracket)
• Rule of 72
  • The number of years it takes for a given investment to double (an estimate)
  • Divide 72 by the known interest rate
  • Numner of years for investment to double = 72 / interest rate
• Offsetting Gains with Losses (Tax Loss Harvesting)
  • Example: If you took a $945 gain with GE, and sell another stock at a $1,000 capital loss, you’d end up with zero capital gains for the year
  • Offsetting Ordinary Income with capital losses: You can use up to $3,000 of your total or net loss to offset (reduce) your adjusted gross income for the year. The excess over $3,000 can be carried over to following years
• Financial Measures Derived from Balance Sheet Pasted image 20220814194905.png

• The Credit Spread describes the difference in yield between Bonds of similar maturity, but with different credit quality (junk bonds vs AAA bonds)
  • 📉 📈 A narrowing credit spread signals confidence in the economy
  • 📈 📉 A widening credit spread signals nervousness about the economy
• Bond Yields Seesaw Pasted image 20220814200152.png
  • Discount bonds (<$1k) → seesaw up
    • Nominal Yield < Current Yield < YTM < YTC
  • Premium bonds (>$1k) → seesaw down
    • Nominal Yield > Current Yield > YTM > YTC

• Exception: Broker-Dealers (BDs) may use testimonials in communications but an Investment Adviser (IA) may never do so
• Unlike with Investment Advisers (IAs), there is no de minimis exemption for Broker-Dealers (BDs)
• American Depositary Receipts (ADRs) are traded in US dollars, but still hold currency risk as the underlying stock is denominated in a foreign currency
• Exemptions from regulation of Investment Advisers (IAs): LATE (Lawyers, Accountants, Teachers, Engineers)

There are certain concepts in the exam that are slightly different variants of each other, or are concepts that sound similar, that the exam will use to trick you.

You must know the differences between:

• Exemptions and Exclusions
• Discretion and Custody, in the context of net capital requirements for state-registered Investment Advisers (IAs)
  • for advisers with custody (whether with discretionary authority or not)
  • for advisers with no custody but with discretionary authority
• Surety Bond vs Fidelity Bond
  • Surety Bond: What an investment adviser is required to post if they are unable to meet capital requirements
  • Fidelity Bond: SIPC members, which are broker-dealers, must obtain this to protect customers against employee dishonesty
• Control Persons
  • The Securities Exchange Act of 1934: 10%
    • Control securities are owned by “insiders”: officers, directors, and owners of 10% or more of the company’s outstanding stock
  • Investment Company Act of 1940: >25%
    • A person is deemed to be a control person of a Management Investment Company when owning/controlling more than 25% of outstanding shares
• Methods of voting on a stock (statutory vs cumulative)
• Traditional and Roth IRAs
• Time- and Dollar-Weighted Return