BIG INVESTMENTS

Question 1

Are brokered CDs subject to interest rate risk?

Answer 1

yes

Question 2

Treasuries = subject to what tax

Answer 2

state and local only

Question 3

Tbills maturity

Answer 3

3-12 months

Question 4

tbills quoted how?

Answer 4

in terms of discounted yeild

Question 5

who are strips normally purchased by?

Answer 5

tax deferred entities

Question 6

What is the term of the EE bond?

Answer 6

20 years

Question 7

EE bond interest rate based on

Answer 7

10 year note

Question 8

Lady held EE bonds until no more interest was being paid (30 years) and then exchanged into HH bonds-

• she she have to pay taxes on the gain?
• did this improve her cash flow?

Answer 8

• no- deferred until cashing in

- yes HH pay semi

Question 9

defer tips income?

Answer 9

no

Question 10

CMO Z tranche- two main things

Answer 10

no coupon
most risk

like a zero coupon

Question 11

ADRs pay or declare dividends in foreign currency?

Answer 11

declare

Question 12

etfs- close ended?

Answer 12

they can be

Question 13

What must you understand before recommending investment

Answer 13

cash flow - main thing

Question 14

GICs are similar to ___ but issued by _____

Answer 14

cds
life insurance companies

guaranteed interest rate

Question 15

how much of reits income must come from real estate investments

Answer 15

75%

Question 16

what types of accounts are best with reits

Answer 16

tax deferred accounts

Question 17

EP and MP on a call have a ____ relationship

Answer 17

inverse

Question 18

Taxation for call writer- less than 9 month option- at time of purchase?

Answer 18

nondeductible cap expenditure

Question 19

Taxation for call writer- less than 9 month option- lapses

Answer 19

gain is short term gain

Question 20

Taxation for call writer- less than 9 month option- option is exercised

Answer 20

gain is added to the sale price and it can be either short or long term

Question 21

Taxation for call holder- less than 9 month option- they exercise

Answer 21

option is considered sold (expired) and is a ST gain or loss (uncommon)

Question 22

Coefficient of variation measures what?

What does it indicate?

Answer 22

relative variability

risk per unit of expected return

Question 23

given the return and SD of two stocks how do you calc which one is riskier

Answer 23

SD / return for each (this gives the coefficient of variation)
low = less risk

Question 24

shortcut for duration questions?

Answer 24

take the maturity and do the next lowest number

Question 25

highly risk averse= steep or flat?

less risk averse= steep or flat?

Answer 25

steep

flat

Question 26

Acronym to remember systematic risk

Answer 26

PRIME 
purchasing 
reinvestment 
interest 
market
exchange

Question 27

Do reit’s trade on exchanges

Answer 27

yes
they are NOT redeemable
even though it might seem like it, remember they are not

Question 28

index funds? what form of EMH

Answer 28

strong- not modern portfolio theory (?)

Question 29

stock needs to be purchased BEFORE WHEN to get div

Answer 29

before ex dividend date

or two business days before record date