Chapter 6 - Investment Returns Flashcards
(27 cards)
The ex-dividend date occurs _____ business day before the record date.
one
Date on which the dividend is announced.
Declaration date
Date on which the dividend is distributed.
Payment date
Date on which a person must own the stock to receive dividend.
Record date
A corporation has declared a cash dividend on June 1, payable on July 25 to stockholders of record on Thursday, July 12. When does the stock trade ex-dividend?
Wednesday, July 11.
A corporation has declared a cash dividend on June 1, payable on July 25 to stockholders of record on Thursday, July 12. If securities are not delivered by July 12, what must accompany the delivery?
A due bill
(True or False) A stock dividend changes the overall value of the portfolio.
False
The _____ of shares is reduced after a stock dividend.
cost basis
(True or False) A stock dividend is taxable in the year it is paid.
False
(True or False) If a cash dividend remains the same, the current yield on the stock will increase after a stock dividend is paid.
True
Current Yield =
Annual Dividend / Current Market Price
A bond’s nominal yield is also referred to as:
coupon rate
To calculate a bond’s current yield, an investor must use its _____ interest payment.
annual
To calculate a bond’s current yield, the _____ of the bond is used, not the investor’s _____.
current market value; purchase price
A bond’s yield-to-maturity is also referred to as its _____ or _____.
basis; yield
If interest rates are increasing, bond yields are _____ and bond prices are _____.
increasing; decreasing
When bonds are callable at par and selling at a discount, use:
yield-to-maturity
When bonds are callable at par and selling at a premium, use:
yield-to-call
When the investor receives some of the original investment back.
Return of capital
(True or False) Cost basis is equal to the amount paid for a security less commissions.
False
The sale of a security held for more than one year results in a _____ capital gain or loss.
long-term
(True or False) The holding period of a security is measured from trade date to trade date.
True
(True or False) Any amount of the original investment received by an investor is considered a return of capital.
True
A security has a 6% rate if return, when the inflation rate is 1.5%, and T-bills are yielding 2%. What is the real rate of return?
4.5%
6% - 1.5% = 4.5%
