General PRINCIPLES Flashcards
Education funding options before college
- UGMA/UTMA
- EE BONDS
- COVERDELL ESA
- 529 PLAN OR 529 PREPAID TUITION
Education Saving Methods or Techniques
Coverdell
UGMA/UTMA
Tax-free Munis
Savings bonds
Domains of financial planning process
- Establish and define relationship.
- data gathering
- Analyze and evaluate
- Develop reccs
- Communicate reccs
- Implement reccs
- Monitor reccs
- Practice within professional and regulatory standards
What are the 7 principles
IOC/FCPD
- Integrity
- Objectivity
- Competence
- Fairness
- Confidentiality
- Professionalism
- Diligence
6 Rules of conduct
RIPOOO
- Define relationship
- Information disclosure
- Property
- Obligation to clients
- Obligation to ER
- Obligation to CFP BOARD
Debt MGMT Ratios
PITI = 28% of gross income Tot. Mo. Debt = 36% Consumer Debt (CC) = 20%
Calculations in BEGIN mode
College tuition
Retirement benefits
Family needs
Calculations in END mode
401k deferrals
PS contributions
Bond interest
Mortgage pmts
What is IRR?
Ya 1 mkt value = $100k WD end of year 1 = $4k “ “ year 2 = $5k “ “ year 3 = $6k Mkt Value end of yr 3 = $120k
Hint: distribution are positive cas flow.
100,000 CHS g CFo 4000 g CFj 5000 g CFj 126,000 g CFj fIRR =10.92%
Securities act of ‘33
Regulated IPOs
Securities act of ‘34
Regulated secondary markets and created the SEC
Investment company act of ‘40
Allowed SEC to regulate mutual funds (UIT, closed-end, open-ended) & variable life and annuities
Securities investors act of ‘70
Established the SIPC to insure against brokerage firm losses.
UGMA vs UTMA
Investments: EE bonds, stocks, MFs, CDs, etc vs same plus RE or LP
TOA to child: 18 or 21 vs up to 25
Gift tax: gif of present value for both
Taxation: both subject to kiddie tax under age 24
Financial aid: asset of child for both.
Fiscal policy
Refers to federal taxation and spending
Monetary policy
Action taken by the fed reserve to influence the growth of the money supply
Reserve requirements
Discount rate: rate charge to bank to borrow reserves
Open mkt operations: repo = buys bonds vs reverse-repo = sell bonds
Margin: sets margin rates
Leading economic indicators
Unemployment claims New manufacturing orders New private housing units Stock prices Index of consumer expectations
Coincident indicators
Industrial production
Number of EE non-agriculture
Personal income less transfer pmts
Business Cycle
- Expansion
- Peak
- Recession/contraction
- Trough
- Recovery/expansion
What is inflation
Rise in the price of goods and services
What is deflation?
Decline in prices of goods and services
What is stagflation?
Combination of slow economic growth and high unemployment
What is disinflation?
Inflation starts to decrease but prices of goods and services are still going up.
Ex: inflation is 1% vs 2% the yr before
How much int was paid in first 10 yrs of a 30-yr, $80k mortgage at 9.75% int rate and monthly pmts?
Step 1: calculate pmts $80,000 CHS PV 9.75 g I 30 g N PMT = $687.32
Step 2: f clear 9.75 g I 80,000 PV 687.32 CHS PMT 120 f AMORT = 1st 120 mos. interest (74,942) X>
