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R02 > Definitions > Flashcards

Definitions Flashcards

1
Q

P/E ratio

A

Price to earnings ratio -

(Current market price of share) / (EPS)

“compares the company’s share price with its earnings per share”

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2
Q

EPS

A

Earnings per share -

Profit) / (Number of shares

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3
Q

Convertible loan stock

A

“A type of loan stock which can be directly converted to common shares under specified conditions and with a predetermined conversion rate.”

Fixed interest investment that can be converted into shares.

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4
Q

FRN

A

Floating Rate Note -

A bond
Issued by companies
Interest not fixed
Rather, linked to a money market rate like SONIA

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5
Q

SONIA

A

Sterling Overnight Interbank Average Rate

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6
Q

SDLT

A

Stamp Duty Land Tax -

No SD is paid if no land transfer takes place.

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7
Q

SDRT

A

Stamp Duty Reserve Tax -

Government taxes charged on the transfer of UK-registered shares bought electronically through CREST

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8
Q

CREST

A

Certificateless Registry for Electronic Share Transfer

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9
Q

Stock transfer form

A

A means of purchasing shares. If used, SD (not SDRT) is paid when shares worth over £1000 are purchased.

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10
Q

Running yield

A

Interest -

The income return an investor receives on the amount paid for a bond

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11
Q

Redemption yield

A

Measures the capital and income return on a particular share until wind up, expressed as an annual percentage.

The total amount of money you’ll get from this bond between now and it’s redemption.

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12
Q

Cum dividend

A

(With) When you pay for a bond + all the interest accrued since the start of this period.

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13
Q

Ex dividend

A

When you buy a bond within the 7 working days between interest registration and payment. You are compensated for this.

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14
Q

Clean price

A

The price of a bond without considering any accrued interest. This is what is quoted on the financial times

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15
Q

Mid-price

A

The price at the mid-point between the buying and selling prices of a bond on the market. An investor would pay a higher price to purchase a bond and receive a lower price to sell one.

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16
Q

Dirty price

A

The total amount paid by the purchaser of a bond. The clean price +- interest adjustment.

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17
Q

Dividend cover

A

Measures how many times the dividend could be paid out of the available current earnings. It indicates the margin of safety that a company has in paying it’s dividends.

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18
Q

FTSE All-share

A

Tracks FTSE 100, 250, and SmallCap.

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19
Q

Rent-a-room relief

A

Individuals who receive rent from letting rooms in their own homes are entitled to a special exemption from tax. £7500 p.a. Tax free

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20
Q

Property income allowance

A

An annual £1000 allowance in which property income is exempt from tax

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21
Q

Property income tax

A

20% tax
If rent a room relief - £7500 allowance
If not - £1000 allowance

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22
Q

M0

A

“Narrow money” - A measure of notes & coins in circulation + banks’ operational deposits with the BoE

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23
Q

M4

A

“Broad money” - A measure of notes & coins in circulation + all instant access and deposit accounts of UK residents

24
Q

MPT

A

Modern Portfolio Theory -

Maximises returns and minimises risk.
You must also consider correlation.

25
Q

CAPM

A

Capital Asset Pricing Model -

Because non-systematic risk can be eliminated by diversification, it isn’t rewarded.

26
Q

APT

A

Arbitrage Pricing Theory -

Share pricing using risk factors and betas

27
Q

Modified duration

A

The measure of sensitivity of a bond or portfolio of bonds to a move in interest rates.

28
Q

Replication

A

Fully replicating the stocks in an index and rebalancing when necessary.

29
Q

Stratification

A

Where a sample of shares held in an index are purchased by a fund manager.

30
Q

Stochastic modelling

A 
"A mathematical technique" 
used to 
"generate a probabilistic assessment" 
of 
"returns and volatility."
31
Q

Levy

A

To impose a tax, fee, or fine.

32
Q

TER

A

Total Expense Ratio -

OCF + AMC + other charges

33
Q

Fettered

A

A fund of funds which only invests in funds run by the same management group (e.g. Vanguard)

34
Q

Par value

A

The amount received by the investor at maturity of a bond

35
Q

Treasury bill

A

Issued weekly by governments through the DMO to finance short term-cash needs.

36
Q

Index linked GILT

A

A conventional gilt but the coupon payments and capital repayment are adjusted in line with RPI inflation.

37
Q

Debenture

A

“A secured loan agreement”
with
“business assets used as security.”

38
Q

Non-voting shares

A

Ordinary shares but no voting rights and therefore typically cheaper

39
Q

Financial Repression

A

When interest rates are lower than inflation

40
Q

PSNCR

A

Public Sector Net Cash Requirement - A recession leads to a higher requirement of cash

41
Q

Efficient Market Hypothesis

A

The hypothesis that you can’t consistently outperform the market.

42
Q

Bail-in-risk

A

Risk of a bank failing

43
Q

Hurdle Rate

A

The growth needed to pay:

  • purchase price,
  • the pre-determined redemption value,
  • or value at round-up
44
Q

Split-Capital Investment Trust

A

An Investment Trust which can split the capital across share classes

45
Q

Pound-cost averaging

A

Like phasing but for regular premium bonds/contracts

46
Q

Maximum Investment Plan

A

Some sort of regular premium plan

47
Q

SAYE

A

An investment vehicle which, on maturity, can be transferred to an ISA without realising a gain for CGT purposes

48
Q

ETN

A

Exchange Traded Note -

A bond.
Not fixed interest, instead linked to an index.
Has a maturity date.

49
Q

ETF

A

Exchange Traded Fund

Index tracking fund
Traded like a collective but as a single share
Updated throughout the day

50
Q

Uncovered call

A

A call over assets which you don’t own

51
Q

Socially Responsible Investing

A

The generic name given to ethical investing

52
Q

Mental accounting

A

When a portfolio is being arranged to meet more than one objective

53
Q

Strategic Asset Allocation

A

Choosing the asset classes

54
Q

Tactical Asset Allocation

A

Choosing the funds within the asset classes

55
Q

Growth at a reasonable price

A

The name given to investing in companies with long-term sustainable advantages

56
Q

Commercial bill

A

A debt instrument
Issued by companies
Fund short term cash needs
Like treasury bills

R02 (2 decks)

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