CACS First Deck Flashcards
Covered person can encourage sophisticated HNW individuals to use lending and credit facilities by ;
Highlighting the potential of using financing for incremental funding to make a healthy spread over borrowing cost, to invest in products which are optimistic about return even after factoring in the borrowing costs
Best way to hedge his currency exposure
Currency options
Which bond had the most interest rate risk ?
Longer duration, zero coupon
To establish the size of lending facility to an existing client. It is critical to establish
The amount and quality of the collateral, client is willing to place
What are growth stocks v
A company stock that tends to increase capital value rather yield high income
Which phase in a company’s life cycle can help and investor grow his investments
During the growth phase. Potential big profits if an investor can spot such a company
Wha kinda investments can provide regular income ?
Non-cumulative preferred stocks provide a regular steam of income forever.
Non cumulative preferred stocks- preferred shares are issued with a staged dividend rate.
Non cumulative- does not pay the stockholder Any unpaid or omitted dividends
Why’s it important; portfolio returns vs benchmark return
It is important as the client expects the fund manager to invest in accordance with the pre agreed bench mark
When a clients portfolio has a standard deviation of 18 %
It means the standard deviation is a figure hah measure the absolute volatility of the fund
After the investment strategy has been drawn out for client. The RM proceeds to carry our
Individual security selection
What’s a way of overstating net profits
Wrongly capitalizing expenses. Where expenditure is treated as an asset
What is a negative earnings surprise ?
When the company actual results falls short of an analyst’s expectations.
A red flag could be a dispute with auditor
What is reflected in the treasury yield curve ?
1) Real rate of return,
2) inflation premium
3) interest rate risk premium
What is a limitation to the benefits of diversification
As more securities are added to a portfolio , total risk expected to fall but at a decreasing rate
