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Series 65 > Book 1 > Flashcards

Book 1 Flashcards

Book 1

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Series 65 flashcards
1
Q

Yield to Call Date or Put Option = ?

A

Annual Income /

(Purchase Price + Call or Put Price
___________________________
2)

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2
Q

Rule of 72 = ?

A

72/Return = Time to Double

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3
Q

YTM = Yield to Maturity = ?

A

Annual Income / Average Price

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4
Q

Current Yield = ?

A

Annual Interest in Dollars / Bond’s Market Price

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5
Q

CAPM: Risk Premium = ?

A

Beta x

(Excess of Expected Market Return
_____________________________
Risk-Free Rate of Return)

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6
Q

CAPM: Expected Return of a Specific Investment = ?

A

Risk-Free Rate of Return + Risk Premium

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7
Q

FV = Future Value = ?

A

FV = P(1+r)^n

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8
Q

Real Rate of Return = ?

A

Nominal Rate - Inflation Rate

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9
Q

After-Tax Yield = ?

A

After-Tax Yield = Taxable Investment =

Taxable Yield x (100% - Tax Bracket %)

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10
Q

Sharpe Ratio = ?

A

(Total Return - Risk-Free Rate of Return)
________________________________
Portfolio Standard Deviation

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11
Q

Total Return on an Investment = ?

A

Income = (Dividends for Equities, Interest for Debt)

+

Growth

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12
Q

Portfolio Returns: ROI Formula = ?

A

(Sum of all Cash Flows from Investments / # Years)
______________________________________
Investment Amount

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13
Q

Broker Loan Rate = ?

A

AKA = “Call Loan Rate”

Loans = callable any time

Broker Loan Rate = Rate Banks Charge to brokers on loans where securities are collateral.

200 basis points higher than Discount Rate.

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14
Q

Prime Rate = ?

A

Rate at which banks make unsecured loans to their most commercial customers.

200 basis points above Broker Loan Rate.

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15
Q

Discount Rate = ?

A

Rate Fed charges Member Banks to borrow reserves directly from The Fed = Discount Rate

100 basis points above Fed Funds Rate.

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16
Q

Fed Funds Rate = ?

A

Rate of Interest that Member Banks charge each other for overnight loans.

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17
Q

Multiplier Effect caused by = ?

A

Change in Reserve Requirements by Fed

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18
Q

Monetarist Theory = ?

A

Fed Reserve drives economic cycles

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19
Q

Supply-Side Theory = ?

A

Decrease government spending.
Decrease taxes.

=

Individuals have incentive to PRODUCE.

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20
Q

Keynesian Theory = ?

A

Increase government spending –> Transfer Payments to Individuals.

=

to stimulate CONSUMPTION.

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21
Q

Debt/Equity Ratio = ?

A

Long Term Debt
__________________
Total Stockholders’ Equity

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22
Q

Quick Ratio = ?

A

Current Assets - Those Not Easily Turned into Cash
_____________________________________________
Current Liabilities

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23
Q

Current Ratio = ?

A

Current Assets
_________________
Current Liabilities

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24
Q

Balance sheet: Net working capital = ?

A

Current Assets - Current Liabilities

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25
Q

Balance sheet: Assets = ?

A

Liabilities + Net Worth = Assets

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26
Q

Balance sheet: Net worth = ?

A

Net worth = Assets - Liabilities

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27
Q

Dividend Payout Ratio = ?

A

Common Dividend Paid
________________________
Earnings for Common

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28
Q

Earnings per Common Share = ?

A

Earnings available for Common
_________________________
Common Shares Outstanding

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29
Q

Net Profit Ratio: Net Profit = ?

A

Net Income after Tax
______________________
Net Sales

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30
Q

Operating Margin of Profit Ratio:

Operating Margin of Profit = ?

A

Operating Profit
___________________
Net Sales

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31
Q

Options: BUY for = ?

A

PROTECTION.

Buy for PROTECTION.

Buy to PROTECT the stock.

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32
Q

Options: SELL for = ?

A

PROFIT.

Sell for PROFIT.

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33
Q

Return on Common Equity = eqn?

A

net income
_________
shareholder’s equity

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34
Q

shareholder’s equity = ?

A

Total assets - Total Liabilities

35
Q

Return on Common Equity = ?

A

Net Income after Tax
_________________
(Common at Par + Capital in excess of par + Retained Earnings)

36
Q

CAPM = Capital Asset Pricing Model = ?

A

ER = Rf + B(ER - Rf)

ERm = Expected return, market

Rf = Risk-free rate

B = Beta

37
Q

Best credit rating for high-yield bonds?

A

BB

38
Q

Alpha = ?

A

R - Rf - (beta Rm - Rf)

R - (beta Rm) [IFF Rf = 0)

39
Q

Basis quote:

Yield to maturity quote:

If market yields INCREASE, then basis quote ___ and bond price ___

A

INCREASE

DECREASE

40
Q

Basis quote:

Yield to maturity quote:

If market yields DECREASE, then basis quote ____, and bond price _____.

A

DECREASE

INCREASE

41
Q

Net working capital = ?

A

Cash + Accounts receivable + Inventory

42
Q

Gross Operating Profit = ?

A

Gross sales - Cost of goods sold

43
Q

The federal reserve will loan funds at the discount rate to whom?

A

Commercial Banks only.

44
Q

Quick Ratio = ?

A

(Cash & Equivalents + Marketable Securities + AR)

____________________________

Current Liabilities

45
Q
    • Income statement
    • Balance sheet
    • Statement of changes in stockholders’ equity
    • sources & uses of cash statement

what report is this?

A

Corporate Annual Report

46
Q

federal open market committee BORROWS money from commercial banks, DECREASES money supply and INCREASES interest rates.

what type of fed action?

A

Reverse Repurchase

47
Q

federal open market committee LENDS money to banks. INCREASES money supply and DECREASES interest rates.

what type of fed action?

A

Repurchase

48
Q

Rf = Risk free rate of return = what?

A

1-year Treasury Bill average (short-term)

49
Q

Risk premium = what?

A

amount interest above the Rf

50
Q

efficient market theory

technical analysis = doesn’t work

fundamental analysis = does work.

what form?

A

weak form

51
Q

efficient market theory

fundamental and technical analysis = doesn’t work.

insider information = does work.

what form?

A

semi-strong form

52
Q

efficient market theory

NO ONE CAN BEAT THE MARKET

what form?

A

strong form

53
Q

Oversold

an oversold condition in the market occurs when the market price averages are _____ daily. But the strength of the market decline (the number of issues declining versus the number of issues advancing) is ______.

A

DECREASING

WEAKENING

54
Q

oversold

when the market is oversold, it is approaching a _____

The next market will most likely be _____

A

trough

upwards

55
Q

what period is this?

  1. issuers are more likely to see fixed income securities.
  2. issuers are likely to sell non-callable issues.
  3. holders are likely to realize capital appreciation on fixed income securities that are not close to maturity.
  4. holders receive payments on fixed income securities that buy more in real terms.
  5. prices fall, money buys “more” in real terms.
  6. interest rates fall.
  7. long term debt prices rise.
  8. issuers are increasingly likely to sell fixed income securities (it costs them less)
  9. issuers are increasingly likely to sell non-callable issues, because interest rates decrease, therefore no need to call-in such issues (when financing rates are so favorable).

what type of period is this

A

DEFLATIONARY PERIOD.

56
Q

Dicount:

When interest rates RISE, yields on existing securities will riseand the prices will ____ – issues will __ call in callable securities.

A

FALL

NOT CALL IN CALLABLE SECURITIES

57
Q

Bonds - big point

Price at a discount:

All yields are ____ the coupon

A

above

58
Q

Bonds - big point

Price at a premium:

All yields are ___ the coupon

A

below

59
Q

Bond volatility:

Bond volatility is MORE volatile with ____ interest rates and ____ prices.

A

SHORT TERM INTEREST RATES

LONG TERM PRICES

60
Q

Bonds, price, volatility

Bond prices become MORE volatile with ___ maturities and ___ coupons?

A

LONGER MATURITIES

LOWER COUPONS

61
Q

bonds with the most volatile price are

A

zero coupon bonds

62
Q

Less volatile bonds have ___ maturity and ___ coupons.

A

SHORTER MATURITY

HIGHER COUPON

63
Q

Net operating profit = ?

A

Operating profit - bond interest expense - taxes

64
Q

gross profit margin = ?

A

gross sales - cost of goods sold

65
Q

Net operating margin = ?

A

gross profit - admin & marketing costs

66
Q

Net profit margin = ?

A

operating profit - bond interest expense - taxes

67
Q

If market interest rates decline, a bond’s yield to maturity, YTM, will ____

A

FALL

68
Q

this measures the risk adjusted rate of return relative to portfolio volatility?

A

Sharpe Ratio

69
Q

Sharpe Ratio formula

A

Rate of Return - Risk Free Rate of Return
________________________
Std Dev

70
Q

For bonds, IRR = ?

A

YTM

71
Q

Return on Common Equity = ?

A

Net Income
_________
Shareholder’s Equity

72
Q

Recession def?

A

decline in GDP for 2 quarters (or more)

73
Q
  1. discount rate = raise/lower
  2. fed funds rate = daily open market operations
  3. money multiplier = change bank reserve requirements
  4. money velocity = speed deposits clear bank to bank, fed imposes maximum clearance times

this is what?

A

federal reserve tools

74
Q

theme: corporate debt:

when is the date the board announces distribution?

A

declaration date, set by BOD

75
Q

when is the deadline date decided by the BOD to own shares, in order to get the dividend?

A

record date, set by BOD

76
Q

when is the day the stock is reduced by the dividend amount?

A

ex date, set by FINRA, 1 business day prior to record date.

77
Q

when is the date on which the divided is paid?

A

payable date, set by issuer

78
Q

conversion ratio for convertible preferred

A

par value of bond
____________
conversion price

79
Q

parity price for convertible preferred

A

conversion ratio x stock’s market price

80
Q

parity price of stock related convertible preferred bond

A

bond market value
___________
conversion ratio

81
Q

debenture (def)

A

long term, unsecured corporate bond backed by full faith and credit of issuer

82
Q

convertible bond - how to do conversion

A

$1,000.00 par
__________
conversion ratio

83
Q

convertible bond –> conversion price?

A

conversion price = (par value of bond / conversion ratio)

Series 65 (2 decks)

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