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Series 65 > Economics & Analysis > Flashcards

Economics & Analysis Flashcards

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Series 65 flashcards
1
Q

Small businesses and individuals typically use the _______ accounting method

A

cash

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2
Q

Cash accounting records transactions on the date _______ is actually received

A

payment

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3
Q

Accrual accounting recognizes expenses based on the date the ______ is incurred

A

liability

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4
Q

Cash accounting recognizes revenue/expenses _____ than accrual accounting

A

later

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5
Q

Both sides of the balance sheet are arranged in order of _______

A

liquidity

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6
Q

CA/CL are due within ______

A

within 1 year

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7
Q

Accounts payable include:

A

AP, Wages, Taxes, and Interest (payable)

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8
Q

Long term capital =

A

LT liabilities + OE

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9
Q

D/E =

A

LT debt / total OE

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10
Q

10Ks are filed anywhere from ____ to ____ after year end

A

60 to 90 (larger companies with over $700m public float file within 60 days, smaller companies at 90 days)

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11
Q

10Qs are ______ and are filed anywhere from ____ to ______ after qarter-end

A

unaudited; filed anywhere from 40 to 45 days (bigger @ 40, smaller at 45)

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12
Q

Earned surplus is another name for _____

A

retained earnings

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13
Q

Falling inflation (measured via the CPI) will result in higher ____ prices and _____ prices

A

stock AND bond prices

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14
Q

Emerging growth stocks are brand new ventures that have high potential reward but NO _____ and typically can’t pay _____

A

track record; typically can’t pay dividends

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15
Q

A typical example of an income security is a ______ stock

A

utility

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16
Q

Counter-cyclical stocks include ______ and _____

A

food producers and gold mining stocks

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17
Q

Speculative stocks include _____ and ____ companies, they are ones that fly high during business cycle upturns

A

airplane manufacturers and toy companies

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18
Q

ROI is the ________ cash flow divided by the ______

A

average annual cash flow divided by the initial investment outlay

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19
Q

Total Return on an investment is =

A

income + growth

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20
Q

The Risk Free Rate is the expected return on _____

A

treasuries

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21
Q

The Sharpe Ratio =

A

(Total Return - RF) / Portfolio STdev

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22
Q

The higher the Sharpe ratio, the greater incremental reward for assuming _____

A

risk

23
Q

The geometric mean takes into account ______ (when the ______ mean does not)

A

takes into account compounding, while the arithmetic mean does not

24
Q

Expected Return is simply the _______ average of different scenarios

A

weighted average of different outcome scenarios

25
Q

The shorter the holding period, the greater the _______

A

variability of returns (STdev)

26
Q

Capital gains on munis are _____ taxable

A

fully (at Fed level too)

27
Q

An active manager’s “active return” is the % by which they ______ the index

A

outperform/underperform

28
Q

Time-weighted returns are used by ______ and show the growth of a _____ investment over a fixed period of time

A

used by mutual funds, show growth of a 1-time investment over a fixed time period

29
Q

Time-weighted return is the same as ______

A

total return

30
Q

An investor’s specific performance in a fund is the _______ return

A

dollar-weighted return

31
Q

Dollar-weighted average return is the same thing as the ______

A

IRR

32
Q

Often, _____ return is lower than _____

A

dollar-weighted return is lower than time-weighted

33
Q

FV (for compounding) =

A

P * (1 + r)^n

34
Q

Non-systematic risk is also known as _______

A

selection risk

35
Q

Monte Carlo simulations are used to find a portfolio’s _______

A

value at risk

36
Q

Examples of high beta companies would be _____ and _____

A

airlines and toy companies

37
Q

Examples of low beta stocks would be ____ and _____

A

drug companies and utilities

38
Q

If beta = 1, then portfolio only has _____ risk; if beta > 1, then portfolio has ______

A

= 1, has only systematic risk, if greater than 1 has non-systematic risk

39
Q

Price volatility of options is measured using ____

A

delta

40
Q

Weak form EMT states that you cannot predict future returns based on _____

A

historical data

41
Q

Semi-strong EMT states that public information is already _______ stock prices

A

baked into

42
Q

Strong form EMT states that stock prices reflect ______

A

all information (public or private)

43
Q

The main risk of investing in a muni bond is ______

A

legislative risk (since the income isn’t subject to fed taxes)

44
Q

What is the biggest risk for holding a zero coupon bond to maturity?

A

purchasing power risk (market risk goes away since you’ll get par back at maturity)

45
Q

Tangible assets tend to keep pace with _______

A

inflation

46
Q

During a time when the yield curve is inverted, issuers will likely sell ______ bonds

A

callable (since when it goes inverted typically all rates are higher)

47
Q

Do corporate bonds have some level of marketability risk?

A

YES - more so than preferred stock

48
Q

A way to hedge against systematic risk is to _______

A

buy puts

49
Q

ROI =

A

Average annual cash returns / initial investment

50
Q

LT bond PRICES are always more _____ than short term bond prices

A

MORE VOLATILE

51
Q

For calculating Total Return, do you take the actual total of all the income and capital gains or do you annualize them?

A

ANNUALIZE them

52
Q

The coupon on a TIPS is ALWAYS the _____

A

real rate of return (inflation adjusted)

53
Q

Does business risk take fraud into account?

A

NO

54
Q

Business risk, most simply, is the risk of buying _____

A

a single stock

Series 65 (10 decks)

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