BIG INVESTMENTS Flashcards
Are brokered CDs subject to interest rate risk?
yes
Treasuries = subject to what tax
state and local only
Tbills maturity
3-12 months
tbills quoted how?
in terms of discounted yeild
who are strips normally purchased by?
tax deferred entities
What is the term of the EE bond?
20 years
EE bond interest rate based on
10 year note
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?
- no- deferred until cashing in
- yes HH pay semi
defer tips income?
no
CMO Z tranche- two main things
no coupon
most risk
like a zero coupon
ADRs pay or declare dividends in foreign currency?
declare
etfs- close ended?
they can be
What must you understand before recommending investment
cash flow - main thing
GICs are similar to ___ but issued by _____
cds
life insurance companies
guaranteed interest rate
how much of reits income must come from real estate investments
75%
what types of accounts are best with reits
tax deferred accounts
EP and MP on a call have a ____ relationship
inverse
Taxation for call writer- less than 9 month option- at time of purchase?
nondeductible cap expenditure
Taxation for call writer- less than 9 month option- lapses
gain is short term gain
Taxation for call writer- less than 9 month option- option is exercised
gain is added to the sale price and it can be either short or long term
Taxation for call holder- less than 9 month option- they exercise
option is considered sold (expired) and is a ST gain or loss (uncommon)
Coefficient of variation measures what?
What does it indicate?
relative variability
risk per unit of expected return
given the return and SD of two stocks how do you calc which one is riskier
SD / return for each (this gives the coefficient of variation)
low = less risk
shortcut for duration questions?
take the maturity and do the next lowest number
highly risk averse= steep or flat?
less risk averse= steep or flat?
steep
flat
Acronym to remember systematic risk
PRIME purchasing reinvestment interest market exchange
Do reit’s trade on exchanges
yes
they are NOT redeemable
even though it might seem like it, remember they are not
index funds? what form of EMH
strong- not modern portfolio theory (?)
stock needs to be purchased BEFORE WHEN to get div
before ex dividend date
or two business days before record date
