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RPA 4 > Assignment 1 - Personal Wealth Mgmt > Flashcards

Assignment 1 - Personal Wealth Mgmt Flashcards

1
Q

an arrangement for the devolution of one’s wealth

involves planning during an estate owner’s lifetime, at his/her death, and for the mgmt and devolution of his/her prop. long after the owner’s death

A

estate plan

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2
Q

**the actions of indiv. and firms in purch. and selling specific prod. and services

**measure of supply and demand for a partic. prod., serv. or industry and the price/cost setting and readjusting in these indiv. mkts.

A

microeconomics

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3
Q

the translation of personal obj. into specific plans and subsequently into financial arrangements to implement those plans

A

financial planning process

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4
Q

expenses incurred to maintain person when they are unable to perform at least several of the normal activities of daily living

A

custodial care expenses

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5
Q

the study of large econ. forces, such as overall prod., economic growth, employment, money supply, gov’t revenues and expenditures, general price levels, etc.

examples - monetary and fiscal policies

A

macroeconomics

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6
Q

fin instit. that invests other ppl’s money and pays them a rate of return on the money

A

financial intermediary

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7
Q

Wealth Mgmt Process

A
  1. ID facts about your fin. situation
  2. set goals on where you would like to be in the future
  3. put plans and fin. mechanisms into place to achieve goals
  4. monitor and measure progress towards the goals
  5. realize the risks in order to retain, reduce, insure and avoid.
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8
Q

Professional codes of conduct for financial professionals

A
  • competence
  • confidentiality
  • compensation
  • conflicts of interest
  • principles of conduct
  • compliance
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9
Q

types of behavioral finance

A
  • anchoring
  • loss aversion
  • status quo
  • regret theory
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10
Q
  • type of behavioral finance
  • using irrelevant info in making a fin. decision
A

anchoring

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11
Q
  • type of behavioral finance
  • tendency to be more disappointed by or fearful of a loss than elated for a gain
A

loss aversion

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12
Q
  • type of behavioral finance
  • being happy with - “how things are today”
A

status quo

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13
Q
  • type of behavioral finance
  • individuals fear making decision they will regret
A

regret theory

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14
Q

Competitive Models in Microeconomics

A
  • perfect comp.
  • monopoly
  • natural monopoly
  • oligopoly
  • monopolistic comp.
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15
Q
  • Competitive Models in Microeconomics
  • most efficient mkt structure
  • many indiv. buyers and sellers
  • no one firm can control the price paid and qty sold as determined by law of supply and demand
  • all firms are “price takers” - adjusting to mktplace
A

Perfect Competition

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16
Q
  • Competitive Models in Microeconomics
  • single firm supplies the entire mkt and can determine the quantity supplied and influence the price
A

monopoly

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17
Q
  • Competitive Models in Microeconomics
  • imperfect competition
  • small # of firms act in a mkt
  • each highly sensitive to the moves of the other firms
A

oligopoly

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18
Q
  • Competitive Models in Microeconomics
  • larger # of firms
  • firms’ products are differentiated enough that each firm does not need to be concerned w/ the actions of the others (competition is limited)
A

Monopolistic Competition

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19
Q
  • general increase in price levels in the econ.
  • measured by CPI
A

inflation

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20
Q
  • general decrease in price levels
  • less common that inflation
  • usually associated w/ econ. depressions and banking/credit crises
A

deflation

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21
Q

the rate in which goods and services increase period-over-period

A

inflation rate

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22
Q

this results due to the fact that because general prices in the econ. have increased, your purchasing power has decreased

A

inflation tax

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23
Q

period in which there is both high UnN and high inflation

A

stagflation

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24
Q

econ. goes through expansions, reaches peaks, retreats into recession, may reach a depression level, and then begins to expand again

A

business cycle

25
Q

How does the Fed increase or decrease the amt of money in the econ?

A
  • controlling level of reserves banks are required to hold
  • discount rate changes
  • open mkt operations
26
Q

the rate at which member bank borrow funds from the Fed.

if Fed raises the rates = i/r increase

A

discount rate

27
Q

What is the effect if the Fed increases the reserve requirements for banks?

A

increase in RR = decreases supply of money = increases i/r

(and vice versa)

28
Q

use of federal gov’t expenditures, borrowing and tax policy to stabilize the econ, and promote steady econ. growth.

A

discretionary policies

29
Q

types of Recession Stabilizers

A
  • certain gov’t expenditures will automatically increase
  • certain tax pmt automatically decrease
  • certain benef. pmts remain fixed (SS) or increase (UnN)

(exact opposite reaction in a period of expansion)

30
Q

markers that are used to measure econ. trends and predict where the econ. may be in the future

A

economic indicators

31
Q

types of economic indicators

A
  • GDP
  • stk mkt indexes
  • commodity price indx
  • U of Michigan Consumer Sentiment Index
  • Status of housing mkt
32
Q
  • type of economic indicators
  • measure of value of the goods and services for a country during a period of time
A

GDP

33
Q

the application of i/r or rate of return on money over a given period

int. is credited out and not applied to the total inv. over time

A

simple interest rates

34
Q

type of rate that pays “interest on interest”

sum of money grows in a exponential way (not linear)

A

compound i/r

35
Q

amt that an inv. fund will grow to, assuming a given compounded rate of return

A

FV

36
Q

amt in today’s $’s of a sum that has been projected for some point in the future

A

PV

37
Q

the annual avg compounded rate of return on monies starting at the beginning of a period until the end of a period

A

internal rate of return

38
Q

pmts made regardless of whether the recipient lives or dies over the period

A

annuities certain

39
Q

pmts are made at the beginning of each period

A

annuities due

40
Q

periods of growth in real production of the econ.

characterized by: low UnN, rising wages, rising values/income from stk, low defualts, rising inflation, higher i/r

A

expansion

41
Q

pmt are made for the duration of the life of the recipient

A

life annuities

42
Q

periodic $age dollar returns on bonds, savings acct, and CDs w/o considering inflation

A

nominal i/r’s

43
Q

periodic pmts are made at the end of each annuity period

A

ordinary annuity

44
Q

nominal i/r returns adjusted for inflation effects (minus current rate of inflation or plus current rate of deflation)

A

real i/r’s

45
Q

signif. decline in econ. activity arising from a decline in the real GDP for 2 consecutive qtrs

A

recession

46
Q

The development and implemtation of total, coordinated plnas for the achievement of one’s overall fin. and personal obj.

the development of coordinated plans for a person’s overall fin. affairs based on fin. obj.

A

private/personal wealth mgmt

47
Q

types of capital accumulation obj.

A
  1. emergency funds
  2. education needs
  3. retirement needs
  4. general inv. fund
48
Q

wealth mgmt objs.

A
  • income tax planning
  • financing education expenses
  • retirement planning
49
Q

wealth mgmt obj.

income tax planning

A

reducing the tax burden related to income-related taxes while estate planning generally deals w/ estate, gif, and GST tax savings

50
Q

wealth mgmt obj.

financing education expenses

A

due to the dramatically increasing costs of financing education

there are now some attractive, tax-efficient plans for financing education costs

51
Q

wealth mgmt obj.

retirement planning

A
  • life expectancy is longer
  • more complex to plan
  • what is sufficient saving
  • recessions/depressions
52
Q

steps in the financial planning process

A
  1. establishing client-planner relationships
  2. gathering data and determining goals and expectations
  3. determining the person’s financial status
  4. developing and presenting the financial plan
  5. implementing the financial plan
  6. monitoring the financial plan
53
Q

Law of Supply and Demand

A
  • price paid and quantity sold for a product in any mkt is = to the point where the supply and demand curves for the product intersect. - price/quantity equilibrium
  • in competitve mkts, the actual price will tend to move to this price until supply demand are at the equilibrium price
54
Q
  • Competitive Models in Microeconomics
  • exists when it would be inefficient to have 2 or more firms competing in the same mkt
A

natural monopoly

55
Q
  • this theory combines psychology w/ econ and fin
  • concerned w/ how ppl actually make econ. decision
  • recognizes that their decision-making process may not be entirely ‘rational’
  • certain attitudes clients display in making wealth mgmt decisions
A

behavioral econ

56
Q

Monetary Policy

A
  • macroecon tools utilized to attempt to control the business cycle and maintain reasonable price stability
  • The Fed conducts monetary policy by affecting the level of mkt i/r’s in the econ. and by controlling the money supply
57
Q

Fiscal Policy

A
  • use of fed’l gov’t expenditures, gov’t borrowing, and tax policy to attempt to stabilize the econ and promote steady econ. growth
58
Q

gov’t expenditures that automatically increase, tax pmts that automatically decrease, and benef. pmts that remain fixed or increase when the econ. turns down (in an expansion, the opposite is true)

A

automatic stabilizers

RPA 4 (12 decks)

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