Brian Lee Quicknotes Flashcards
8k is
How long does info need to be sent for?
“reportable events”, i.e. material information, must send w/in 4 days
10Q
10Q – Quarterly financial report
IRR
Is expected return
Time value of money
IRR makes Net Present Value (NPV) = 0
Central Tendency
(mean, median, mode, range)
Standard Deviation
1 stand. dev. 67% of time, 2 stand. dev. 95%
Correlation
low to negative correlation = diversification
Systematic risk
Market (beta)
interest rate
PRIME
Purchasing power
Reinvestment
Interest rate
Market
E (insert)
Unsystematic risk
Business (alpha), regulatory, political
Money Market Instruments
Not insured
Highly liquid – short-term “parking garage” for money
short-term Treasuries (T-bills), certificates of deposit (CDs), commercial paper, repurchase agreements (repos), and money market mutual funds
Insured Deposits
demand deposits & CD’s
Safest securities for capital preservation and Income
Bills, Notes, Bonds
Corporate Bonds
For investors who want to maximum income, risk determined by credit rating
Long term bonds
Convertible bonds
Zero coupon bonds
Long-term bond prices more volatile than short-term bonds
convertible bonds – lower coupon rates and less interest rate sensitive
Zero Coupon bonds MOST volatile
Duration is
a measure of volatility, NOT MATURITY
Discounted cash flow
How much income does a bond generate (principal, coupon rate, maturity date).
Municipal Bonds
Interest is Fed. tax exempt and State tax exempt if you are a resident of the state. High tax bracket investors are most suitable
- General Obligation Bonds – backed by taxes, i.e. income, sales, property
- Revenue Bonds – backed by user fees, i.e. tolls, leases (
- Industrial Development Bonds) IDR’s maybe subject to AMT
Tax-Equivalent Yield – comparing tax-exempt bonds to taxable bonds
muni yield/ (100% - tax bracket)= equivalent corporate yield 2. Corp. yield x (100% - tax bracket) = equivalent muni yield
ADR’S
facilitate domestic trading of foreign securities to diversify stock portfolio,
risk: fluctuating currency
Restricted Stock
private placement (Reg. D) stock, restricted for 6 months, only
accredited investors ($1mill Net Worth–less home or $200k ann. Inc.)
Open-end Investment Companies (mutual funds) - priced at end of day based on NetAsset Value (NAV) of the portfolio – A vs B vc C
a. Class A – Front-end load
b. Class B – Back-end load, contingent deferred sales charge (reduces over time)
c. Class C – Level load, flat annual fee (12b-1)
Futures
a. Exchange traded
b. Consumers buy futures to lock in cost
c. Producers sell futures to lock in price
Insurance-Based Annuity’s
- Fixed Annuities
a. Guaranteed return (No investment risk, has inflation risk, not a security) - Variable Annuity – Non-qualified, Tax deferred (10% penalty for dist. Prior to 59 1⁄2)
a. Taxed in excess of basis (LIFO) as ordinary income
b. Surrender charges - Index-Based Annuity
a. Participation Rate determines return - Index up 10% + Part. Rate 80% → Investor Return = 8% 2. Valuation done by using point-to-point method
Balance Sheet
assets, liabilities, net worth. Does not include income