High 5 Investment Planning Flashcards
what kind of company would be best suited to use the constant dividend growth model?
a stable company or mature company with stable cash flows
Sharpe and Treynor ratios are _____ measures
relative
Jensen’s alpha is a(n) ____ measure
absolute
what is the risk measure of the Sharpe ratio?
standard deviation
what is the risk measure of the Treynor ratio?
Beta
___ based on the theory that long term rates can be used to predict future short term rates
unbiased expectations theory
approximately ___% of outcomes fall within 1 standard deviation of the mean
68%
approximately ___% of outcomes fall within 2 standard deviation of the mean
95%
approximately ___% of outcomes fall within 3 standard deviation of the mean
99%
___ measures the number of standard deviations a data value is from the mean
z score
the efficient frontier contains ___ on the y axis and ___ on the x axis
expected return ; standard deviation (risk)
true or false?
the efficient market hypothesis states that day to day price changes follow a random pattern
true
what are the three forms of efficient market hypothesis?
weak
semi strong
strong
true or false?
the weak form of the efficient market hypothesis states that technical analysis is already included in current price
true
true or false?
the weak form of the efficient market hypothesis believes fundamental analysis and insider information could help gauge prices better
true
true or false?
the semi strong form of the efficient market hypothesis believes both the technical analysis and fundamental analysis and insider information are all already priced into the market
false, insider information is missing under semi strong form
true or false?
the strong form of the efficient market hypothesis believes all info including fundamental analysis, technical analysis, and insider information are all already priced into the market
true
how to calculate current yield on a bond?
coupon payment / current market price
a zero coupon bond will have a tendency to be ___ price volatile than a bond with a 4% coupon bond
more
the ___ the coupon rate of a bond, the more stable it will be when interest rates change
higher
when a bond is trading at a ____ the coupon will be greater than the current yield, YTM, and YTC
premium
a bond trading at par value will have a coupon rate ____ to the current yield, YTM, and YTC
equal
a bond trading at a discount will have a coupon rate ____ than the current yield, YTM, and YTC
lower
___ is the percentage of the original purchase that must be provided by the investor
initial margin
initial margin is usually equal to ___%
50%
___ is the level at which an investor will be required to add funds to the margin account
maintenance margin
in regards to margins ____ is the loan amount owed to the broker
debit balance
in regards to margins ____ is the value of the security less the debit balance
equity
