Book 3

Question 1

Private Placements - AI

Answer 1

Limited to 35 unaccredited investors + an unlimited number of accredited investors

Question 2

Accredited investor

Answer 2

• Trust with $5M
• Person with $1M NW
• Couple with $300K income in prev. 2 years (single = $200K)
• Director of company selling securities
• $5M + charitable organization or retirement plan

Question 3

Tips Calc

Answer 3

Semi-annual inflation rate X par value = principal

Principal x Coupon rate = payment - going forward adjust principal off last amount

Question 4

International Bonds

Answer 4

Yankees - Intl bonds issued in US dollars in US

Eurodollar Bonds - Bonds issued in Intl countries in USD

Euro-Bonds - Bonds denominated in a currency not native to the country in which they are issued

Question 5

Mutual fund transaction expenses

Answer 5

Class A - Front End load (more suitable for long-term purchases)
Class B - Back End Load (CDSC) is assessed if they are sold within a certain date from purchase
Class C - Level load, is AUM based and uses 12b-1 fees as a sales charge

Question 6

Averaging Techniques

Answer 6

Dollar Cost Averaging - Same amount each month

Value Averaging - Buying up to Schedule each month

Share Averaging - same amount of shares each month

Question 7

Convexity

Answer 7

Positive is better, duration doesn’t get the whole picture. IR fall, price goes up by more than expected, IR rise, price doesn’t fall as far as expected

Question 8

Dividend Growth Rate

Answer 8

Return on Equity / Retention Rate (for earnings)

Question 9

Geomean Calc

Answer 9

PV = -1
FV = (1+RR)(1+RR)(1+RR)…
N = Period
Solve for I/Yr