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QAFP > Foran - Investment Planning & Math > Flashcards

Foran - Investment Planning & Math Flashcards

1
Q

Six areas of comprehensive financial plan by FP

FIITRE

A 
Financial management 
Investment planning 
Insurance 
Tax
Retirement 
Estate
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2
Q

Describe financial management in FP

A 
Clients position 
Cash flow 
Net worth 
Budget
Goal
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3
Q

Describe investment planning in FP

A

How to manage based on experience, objectives, horizon, risk

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4
Q

Describe insurance in FP

A

Strategy to manage risk

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5
Q

3 basic functions of financial plan. CAR

A

Collect
Analysis
Recommend

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6
Q

Acronym for letter of engagement

Client has CCC client rating and are on the ROPES and need Quick Debt Financing

A 
Compensation 
Conflict 
Confidentiality of info
Responsibility to provide info
Outside professional 
Process to be followed 
Expectations, assumptions. Ie inflation 
Service
Qualifications 
Documents ie wills
Future reviews
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7
Q

FP 4 sections of standards of professional responsibility

A

Code of ethics
Rules of conduct
Fitness standards
Practice standards

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8
Q

FP code of ethics
8 principals to commit to
If not, worse consequence is revocation of CFP

Acronym list codes.
Loyal investment officers conduct financial compliance duties personally

A 
Loyalty to client 
Integrity 
Objective 
Competence
Fairness
Confidentiality 
Diligence 
Professionalism
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9
Q

FP Fitness Standards

Bars to certification

A

Currently bankrupt
Senior position in bankrupt co within 5 years
Revocation or license suspended 1 year or longer
Guilty to criminal offence

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10
Q

FP practice standards for all client engagement offered

Acronym
REGI ASRRII

A 
Role, ensure client knows role of financial planning,goals, needs
Engagement, agree on engagement 
Goals, identify goals, needs etc
Information, gather info
Assess, clients current situation 
Strategies 
Recommend, develop and prioritize
Recommend, present
Implementation, discuss implementation 
Implement
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11
Q

FV =

A

PV (1 + r)n

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12
Q

How to calculate discount rate

A

Reverse of ROR

Bring FV back to PV

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13
Q

Holding period ror

HPR=

A

Sales proceeds - purchase price + net cash flow

Purchase price

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14
Q

Calculate Annualized HPR, if FV not provided

A

Step 1 calculate FV = (PV + r). R is decimal.

Then use this FV to calculate annual return. Ie. 30 months divided by 12

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15
Q

What is Real Rate of Return

A

Return after inflation is factored in

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16
Q

Calculate real rate of return

A

Pretax return - inflation rate
1 + inflation rate

  • all decimal
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17
Q

Calculate Real AFTER TAX Rate of Return

A

1) . After tax amount = pretax return (1 - client tax rate)
2) . Real Rate of Return calculation but use above as return rate

Ie after tax return - inflation
1 + inflation

1* all decimals

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18
Q

Calculate geometric mean return

A

[(1 + r1)(1 +r2)….(1 + r6)] 1/6 - 1

*** r is decimal

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19
Q

Using TVM for geometric return

A

1) calculate FV. = PV (1 + r1)(1 + r2)…..(1 + r6)
2) use above FV to calculate return

** r is decimal

20
Q

Time weighted return assumption

A

Assumes investors made on deposit at beginning of period. Ie year

21
Q

What does Internal Rate of Return stand for. IRR

A

When dollars were invested

Ie. time weighted= beginning of year

22
Q

How to calculate time weighted IRR

A

1). Calculate FV by calculating return in each period and adding PV

I.E. $1m (1 + r1)(1 + r2)…..(1+ r6)

2) then use FV to calculate return

23
Q

Calculate Money Weighted IRR

A

1). Calculate FV. IE. $1m (1 + r1)(1+ r2)…..(1 + r6)

2) calculate. CF 2nd CLR WORK
CF (PV). Ie $1m +/- Enter
^ 0 Enter
^^ 0 Enter
….. continue for periods
^^ FV ( Calculated above) Enter
IRR CPT

24
Q

Formula to Calculate Effective (Compound) Rate of Return

A

E = (1 + r)^m - 1

25
Q

How to calculate Effective Annual Rate of Return

A

1) . Convert annual rate to period. Ie quarterly. Ie. 12% / 4
2) . The use formula of (PV + above)^number of periods - 1

26
Q

How to calculate Effective Annual Rate of Return on calculator

A

(Period growth) y^x (number of periods in year) - 1

27
Q

What a client wants to receive payments that don’t encroachments on capital. How would you calculate

A

Payment / return

28
Q

Mortgage interest factor calculation

Semi annual interest with monthly payment

A

(1+ I/2)^ 2/12

29
Q

Calculate Overall profit/Loss Canadian $

A

= sales proceeds x exchange rate (cdn) - purchase costs x exchange rate (cdn)

30
Q

Calculate percent return on foreign investment in Cdn $

A 
Profit/loss
Purchase cost (cdn).    X 100
31
Q

Define strategic asset allocation

A

Long term, portfolio fixed. Ie 5% cash, 15% bonds

32
Q

Define dynamic asset allocation

A

Rebalancing regularly

33
Q

Define tactical asset allocation

A

Tilt portfolio away from strategic to take advantage of short term opportunity

34
Q

Cash investment includes

A

Gic , bonds and mortgages under 1 year
Often 5%
Money market

35
Q

Fixed income includes

A

Gic, bond and mortgage over 1 year
Preferred shares
Held for income
Convertible bonds and preferred shares

36
Q

Equity securities includes

A

Income trusts - promise to pay investor 90-95% of free cash flow
Derivatives, rights, warrants, calls and puts

37
Q

What are MM instruments

A

Short term debt issued by government and corps

38
Q

Types of government mm

A

Treasury bills

39
Q

Type of Corp mm

A

Commercial paper - sort term unsecured debt
Asset backed commercial paper- short term secured
Bankers acceptance - short term and backed by bank * safest

40
Q

T bill yield calculation

A

Face value- price (100). X. 365. X. 100
Price. Days to maturity

41
Q

Are bonds and debentures (fixed income) secured

A

Bonds are but debentures are not

42
Q

Who issues bonds and debentures

A

All levels of government

43
Q

2 categories of government of Canada bonds

A

Redeemable

Marketable

44
Q

What are Gov of C redeemable bonds

A

Can cash anytime, not transferable, no secondary market
CSB and Canada premium bond, premium has higher rates
Premium can be bought at bank, savings through payroll
Must be held at least 3 months
If redeemed early, savings pay interest to end of previous month, premium to last anniversary

45
Q

When was last Canada savings or premium bond issued

A

2017, will matured in 2020

46
Q

What are gov of Canada marketable bonds

A

Offered through auction
Backed by cdn government, also backs crown Corp
Market price fluctuate
Mostly sold to institutions

QAFP (12 decks)

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